Eskom will not survive in present form – JP Landman

South Africa is undergoing an energy revolution away from a centralised power system to a decentralised, private system, and Eskom will not survive in its present form over the next 5 to 10 years. 

This is the view of political analyst JP Landman who spoke about the power utility during a webinar with Nedbank Private Wealth. 

South Africa’s power system is going to become decentralised within the next 5 to 10 years, Landman said, with multiple private electricity generators and distributors. 

This will have economic, social, and environmental benefits for South Africa.

This energy revolution has been driven by load-shedding, which has forced businesses and individuals alike to find alternative sources of electricity. 

For Eskom, “the train has left the station in terms of privatisation” with generation set to be privatised, and distribution will follow – by choice or by default. 

The privatisation of electricity infrastructure is estimated to result in R1.5 trillion investment in the next five years. This will boost economic growth in the long term, said Landman. 

Ultimately, the private sector will take over government services. “It will change completely in the next ten years,” he said.

No quick fixes

Landman said the reality is that South Africa is in a tough spot, and there is no short-term relief for citizens.

According to his data, load-shedding will only be significantly reduced from the end of 2024, when many private sector generation projects will be completed. 

Currently, there is a 4,000MW to 6,000MW baseload shortfall. It would require 18,000MW of renewable energy to close the gap, according to Landman’s calculations. 

This is due to the inconsistent power supply from solar and wind. 

There is roughly 12,000MW of renewable capacity at various levels of construction in South Africa, 9,000MW of which comes from private producers. 

Most of these projects will only be completed and connected to the grid at the end of next year. When coupled with Eskom’s estimated recovery plans for Medupi and Kusile, it will close the shortfall at the end of 2024.

“Then, we are in a new game”, said Landman. The grid will effectively be rented out to private power producers, similar to how fibre companies rent out their infrastructure to internet service providers. 

There is also 3,600MW of rooftop solar in South Africa, with roughly 1,000MW added annually, further decentralising and localising electricity supply and generation.

Private sector is taking over

Efficient Group chief economist Dawie Roodt agrees with Landman, saying Eskom is “simply dying” and that electricity production is being privatised.

“In the long term, electricity generation will be private. Eskom will merely distribute electricity with the utility being relegated to buying electricity from other entities and selling it on,” said Roodt.

Apart from the private sector taking over Eskom’s responsibility to provide stable power, the state also seems to privatise the power utility with its latest debt takeover conditions.

If the conditions attached to Eskom’s debt relief plan from the National Treasury are applied, the utility will effectively be privatised. 

This is echoed by other commentators such as Kokkie Kooyman, a finance sector expert at Denker Capital, who called the ANC policy “privatisation by stealth”.

The energy revolution is exemplified by Remgro, which has launched Energy Exchange which is set to start selling affordable wind and solar power to South African businesses in mid-2023.

Energy Exchange is a NERSA-licensed electricity trader, offering corporate customers an alternative renewable source of electricity produced by independent power generators.

Buyers can rely on energy sources such as wind, solar, biomass and hydro, which matches their needs more accurately, rather than just relying on a single source.

Importantly, the electricity tariffs charged by Energy Exchange are competitive and escalate at inflation, providing a predictable and stable cost estimate for corporates.