South Africa’s Energy Transition Is Mired in Disaster Capitalism

Years of sabotage by South Africa’s corrupt energy interests have led to unprecedented electricity blackouts and a stunted renewables sector. President Cyril Ramaphosa’s solution: privatization.

The Medupi power station at Lephalale, Limpopo, South Africa. (JMK / Wikimedia Commons)

On July 25, in a televised address to the people of South Africa, President Cyril Ramaphosa outlined a sweeping plan to overhaul the country’s dysfunctional electricity sector. The plan includes widespread liberalization of energy generation, efforts to help Eskom — the ailing state-owned energy utility — and major ramping up of renewable energy, storage, and gas power.

Ramaphosa’s plan was delivered in the aftermath of the worst period of scheduled nationwide rolling blackouts in South Africa’s history — euphemistically labeled “load shedding.” South Africa has faced varying levels of load shedding since the policy began in 2007. But 2022 has been the worst year on record by far, with about seventy days of load shedding experienced by just halfway through the year.

July saw load shedding reaching truly disastrous proportions, with areas often experiencing six to eight hours of blackouts per day, especially intensely in working-class, poor and black communities. It was in the wake of this dark period, with popular frustration and anger at all-time highs, that President Ramaphosa announced his administration’s plan for sweeping changes, including wide-scale privatization of energy generation.

For many on the Left, the president’s energy plan had the all the hallmarks of disaster capitalism, where private interests sweep in to profiteer in the wake of disasters. In this case though, the disaster was manmade and decades in the making. It’s worth exploring that history in more detail to understand how South Africa arrived at this crisis.

The Decadeslong Making of a Disaster

The origins of South Africa’s energy crisis date as far back as 1998 when a government gazette issued a stark warning. The country needed to invest in new electricity generation by 2007, or else it would face a shortfall in energy supplies.

In South Africa, electricity has historically been provided almost entirely by monopoly state-owned entity Eskom. However, instead of instructing Eskom to invest in new generation, the ruling African National Congress (ANC) started down a pathway of corporatizing Eskom through the 2001 Eskom Conversion Act. The aim was to attract private investment in generation.

That investment never materialized, largely because Eskom’s prices were then too low to be profitable enough for the profit-driven private sector. Having failed to build generation or attract new private investment, the warnings of electricity supply shortages came true.

Like clockwork, load shedding began in 2007, exactly as predicted by the government gazette. The then president Thabo Mbeki had to issue a major public mea culpa for his government’s failure to heed Eskom’s warnings about the looming energy supply shortage.

So began a fifteen-years-and-counting struggle with load shedding, and with it the first rounds of democratic South Africa’s energy disaster capitalism.

State Capture

In 2008 the electricity crisis kicked into higher gear, with triple the amount of load shedding of the previous year. Underlying the uptick, though, was a more sinister motive — what South Africans term state capture: a systemic form of political corruption in which private interests capture a state’s regulatory and decision-making process for its own advantage.

According to a report by the anti-corruption Special Investigating Unit (SIU), 2008’s deepening load shedding was partly engineered by Eskom employees who ignored repeated warnings that coal stocks were running low. A coal shortage, coupled with underinvestment in generation, sent load shedding into hyperdrive. This was a disaster that opportunistic capitalists and state actors sought to capitalize on.

The SIU report explored how the self-inflicted emergency was then used as a pretense to sign on to $900 million in overpriced coal contracts. That amounted to perhaps the largest transfer of wealth in South Africa’s democratic history. It has taken place over the past decade and a half as the cost of electricity has risen by more than 500 percent and the public treasury provided Eskom with tens of billions of rands in bailouts. This was redistribution from the government’s coffers to politically connected capitalists.

The report detailing this vast corruption scheme was delivered to then president Jacob Zuma in 2017, but never released to the public. This was because Zuma and his cronies were at the heart of the network of state capture around Eskom and many other state-owned entities too, as  subsequent reports from the South African state-capture commission have detailed.

White Elephants

Corrupt coal supply contracts were not the only early legacy of the energy crisis. The government also introduced haphazard plans for two new mega-coal-power plants, named Medupi and Kusile, which would end up being some of the biggest coal plants ever constructed. The ANC government did so despite widespread resistance from civil society.

Those who opposed the plans argued that building mega-coal-power plants would turn out to be environmentally and economically unwise in the face of both the climate crisis and increasingly cheaper renewable energy, which would be much quicker to build and produce a faster solution to the load shedding crisis. Both projects were approved by the Mbeki administration despite these prophetic critiques.

The result over a decade later is both Medupi and Kusile are still not fully complete, have major construction defects, and have been mired in corruption, which has seen their costs balloon to hundreds of billions of rands over budget. They provide less energy than promised, at an incredibly expensive price, and have locked South Africa into new coal.

Ironically, Medupi was funded in significant part by the World Bank, which is now offering South Africa funding to transition away from coal. The World Bank funding was mired in corruption scandals involving the ANC’s investment arm, Chancellor House, which was heavily invested in the Japanese company, Hitachi, that built the boilers at Medupi. This has led to calls for the debt incurred for the projects to be struck off as odious, illegitimate debt.

A Detailed Renewable Energy Plan

In 2011, the South African government finally introduced a renewable energy program through a government private procurement program known as the Renewable Energy Independent Power Producer Procurement Program (REI4P). With solar and wind still in their infancy, the first few rounds of the program saw renewables cost significantly more than existing coal.

Many commentators saw those expensive initial rounds of experiments as an acceptable investment to subsidize new technologies that would in the long run help make South Africa’s energy cleaner and cheaper. They were right: the learning curve was fast for renewables, particularly with global costs dropping fast. By 2016 it could have been possible to provide renewable energy at a much lower cost than coal in South Africa.

Unfortunately, once the learning costs had been paid for, the renewable energy program was stalled and virtually shut down by executives in Eskom put in place by President Zuma. The motivations for this were complex, including proclaimed yet hypocritical resistance to privatization. A large part of the motivation, though, had to do with a corrupt coal lobby trying to protect its ill-gotten profits.

A recent study demonstrated that had the renewable energy program continued apace, the new energy supplied could have prevented nearly all load shedding in 2021. That did not happen. Instead, for over six years Eskom and the private sector were blocked from investing in large-scale renewable energy generation.

A False Reprieve

Between 2016 and 2018, South Africa was granted a false reprieve, where little to no load shedding occurred. While a welcome break, it came at significant cost. As investigations have shown, the Zuma-appointed, corrupt Eskom management at the time ran the coal power plants virtually into the ground, ignoring much-needed maintenance.

This rough treatment did profound damage to South Africa’s elderly coal power plants, which are forty years old on average, excluding Medupi and Kusile. The result is that since 2019 the coal power plants have experienced an unprecedented frequency of breakages, defects, and unplanned maintenance. With Eskom having a shortage of new energy supply, it has not had the ability to maintain these ailing plants properly without turning off the lights.

All these factors have created a perfect storm that has resulted in exacerbated load shedding for South Africa at an almost incalculable cost to the economy. Additional factors include credible reports of sabotage within Eskom, by opponents of the current administration and Eskom management. Then in June, a strike by Eskom workers added to Eskom’s challenges in keeping the lights on.

Enter Privatization

It is against this backdrop of a decades-in-the-making energy crisis that Ramaphosa’s energy plan was introduced, with its heavily privatized vision of South Africa’s energy future. Since coming into power in 2018, the Ramaphosa administration has been trying to revive government procurement of private renewable energy through the REI4P.

Two new bid windows of the REI4P were run by Ramaphosa’s appointed minister of mineral resources and energy, Gwede Mantashe — although no new power has yet come online due to a complicated combination of factors including Minister Mantashe’s self-declared “coal fundamentalism” and resistance to renewables. Ramaphosa’s recently announced energy plan will see the next bid window double the amount of renewable energy to 5,200MW from 2,600MW. It will also move forward and speed up bid windows for battery storage and gas.

Alongside government procurement of private power, Ramaphosa also plans to remove huge amounts of “red tape” for private embedded energy generation. That includes lifting licensing requirements for projects and introducing a feed-in tariff so that excess energy can be sold back into the grid. All together Ramaphosa’s plan amounts to the unprecedented liberalization of South Africa’s energy sector.

This plan, if successfully implemented, would see a massive uptick in private investment in renewable energy. Estimates suggest that in the corporate world alone there are thousands of MWs of new energy projects waiting to invest. As such, by lifting the obstacles that were previously preventing such projects from proceeding, Ramaphosa’s energy plan could open the floodgates of private renewable energy generation.

For many South Africans, tired of over a decade of government dysfunction and blackouts, the entry of the private sector seems like a welcome relief. However, as the South African Federation of Trade Unions (SAFTU) warns, that’s how privatization tends to work. In their response to the president’s plan, they turned to the words of Noam Chomsky: “That’s the standard technique of privatization: defund, make sure things don’t work, people get angry, you hand it over to private capital.”

What’s So Bad About Privatization?

Many even relatively progressive voices in South Africa have been asking what is so bad about privatization. After all, private renewable energy would be able to rapidly bring on new, cheaper, cleaner energy, and it wouldn’t have to rely on a government characterized by deep dysfunction. Sadly, the state of affairs in South Africa has become so dire that many see no better alternative.

In a country as unequal as South Africa, though, if the energy transition is largely left to the private sector or the market, then the benefits are likely to be concentrated in the hands of corporations and the wealthy. South Africa is already the world’s most unequal country, where 10 percent of the population owns more than 80 percent of the wealth, according to a recent World Bank report.

Due to the significant up-front capital costs involved in installing renewable energy, a laissez-faire approach to the energy transition would see those already with access to wealth and capital controlling the process. Meanwhile, the majority of South Africans who face poverty and unemployment would be largely excluded from the benefits and ownership of renewable energy.

The president’s plan does not include any policies to ensure that low-income households benefit from renewables. Nor does it have policies to encourage more progressive, socially owned renewable energy. Given this landscape, corporations and the wealthy seem lined up to dominate South Africa’s energy future.

What About Eskom?

Eskom’s management for its part has welcomed the president’s plan, as it aligns with many of the demands it had put forward before. It would bring online much needed new energy supply and give Eskom breathing room to do maintenance on its plants. The plan also includes an increased budget and expedited processes for Eskom to perform much-needed maintenance.

Increasing privatization of the generation space also fits well with the Eskom CEO’s views that it doesn’t make sense for a very debt-laden Eskom to invest heavily in generation at a large scale. That does not mean Eskom is not investing in new generation capacity.

Eskom’s Just Energy Transition office has announced that between 2023 and 2027 Eskom will be investing in a pipeline of around 10GW of solar, wind, battery storage, and gas. Many of those projects are part of Eskom’s attempts to repower and repurpose aging coal plants. This is meant to help ensure that coal-dependent workers and communities are not left behind in the transition.

In total, Eskom has a pipeline of 100 projects to repower and repurpose old coal plants and invest in generation, transmission, and distribution. While it is encouraging to finally see Eskom investing in new energy, especially renewables, the scale of its ambition is quite small in the face of this crisis.

Eskom’s own forecasts suggest South Africa will need to bring online 50GW of renewables and storage by 2035. Thus, unless Eskom plans to significantly ramp up its generation investment after 2027, the private sector is set to dominate new generation. What’s more, even Eskom’s own plans are likely to be public-private partnerships.

Public-Private Corruption

For those who believe that the private sector is the answer to corruption, it is worth remembering that much of South Africa’s state capture lies at the interface of public-private partnerships. This is an especially important concern for South Africa, given that the president’s energy plan would see the rolling back of much red tape to fast-track projects.

Rolling back red tape might be positive in contexts where projects like solar and transmission are being expedited appropriately. But there are worries about how a scaled-back regulatory environment might be taken advantage of to push through problematic projects and sidestep vital environmental, economic, and social safeguards.

For example, the president’s plan foresees expediting a round of public procurement for gas power. This comes at a time when many in South Africa are resisting a major move toward gas that is being orchestrated by the government in a dubious partnership with rapacious multinationals like Shell.

Communities are resisting gas extraction because of the environmental damage it leave behind with little benefit for those affected. Additionally, studies show that gas is increasingly expensive, compared to the alternative of pursuing more renewables and storage.

One of the most worrying projects is being pushed by energy minister Mantashe. When he first came into office in 2019, Mantashe created an emergency energy procurement program, which promised to deliver 2,000MW of energy. The problem was Mantashe’s department rigged the program’s parameters to favor powerships — basically large ships with onboard power plants that burn gas.

The powerships are owned by a Turkish company, Karadeniz, mired in corruption scandals the world over. In South Africa, the powership program has stalled in the face of major corruption allegations. Apart from being snared in legal and environmental challenges, this idea would be extremely expensive given current gas prices.

Where to From Here?

Any critique of the president’s plan must balance the fact that a faction of the ANC aligned with the coal lobby is working to topple the president and reverse progress on clean energy. This faction tends to draw on left-sounding rhetoric, defining its cause as radical economic transformation (RET). In reality, it has been aligned with deep corruption and the pillaging of the state, enriching themselves and their capitalist friends at the expense of the poor and working class and thus harming the very people it claims to care for, the poor and the marginalized.

Ramaphosa’s position is tenuous. In order to stay in office, he has forged alliances even with those who are hostile to his plans, including his own energy minister Mantashe. Shortly after the president’s energy plan was announced, the ANC hosted its policy conference. There the RET faction rallied behind Mantashe to say that Eskom should be put under his control, because he is a “coal fundamentalist” who resists the transition to renewables.

A real left alternative to the RET in South Africa remains far off, especially given recent infighting among major trade unions. The reality is that South Africa’s left is at an all-time weak point. As such, for those in South Africa who would like to see a more socially owned renewable energy future, we stand at a very difficult juncture.

On one hand, both the climate and energy crisis make the need for new renewable energy incredibly urgent. On this front, the president’s plan may provide the most likely path to deliver in the short-to-medium term. Supporting the president’s plan against attacks from the coal lobby might be the most feasible plan in the short term to ensure renewables come online.

But supporting the president’s plan from the left amounts to somewhat of a Faustian bargain. While it unlocks renewable energy, it puts South Africa onto a heavily privatized vision of energy generation with little to nothing by way of policies to ensure progressive, affordable, socially owned renewable energy.

Building in a Moment of Crisis

This moment perhaps also presents an opportunity to build a progressive alternative vision of our energy future and mobilize and build a stronger left around it.

One such vision has been put forward by the Climate Justice Coalition — a coalition of trade union, community, and nonprofit organizations advancing a transformative climate justice agenda. The coalition has a campaign for a Green New Eskom. Its core vision is for a rapid and just transition to a more socially owned, renewable energy future, which provides clean, safe, and affordable energy for all, with no worker or community left behind.

The campaign foresees Eskom playing a much stronger role in driving our energy future and ensuring a just transition for workers and communities. Unlike the South African Communist Party, the Green New Eskom campaign does not see Eskom continuing as an energy generation monopoly. Instead, it sees Eskom leading a more decentralized energy future with households, businesses, and cooperatives helping Eskom to drive a clean energy future.

Unlike the president’s corporate- and wealthy-dominated energy vision, the coalition is pushing a slate of demands to ensure just transition that works to more equitably share the benefits of the transition. That includes mass rollout of solar panels for low-income families, mass jobs and skills programs, green industrialization policies, and more.

As the name would suggest, the Green New Eskom vision shares similar ideological underpinnings to the Green New Deal. It foresees the public sector investing heavily to ensure a transition that puts social, economic, and environmental justice at its heart. Like South Africa, the United States faces a similar complicated setback to such a sweeping vision.

The major energy and climate deal coming out of the US Senate, titled the Inflation Reduction Act (IRA), is set to deliver major climate benefits by unlocking a massive amount of investment in clean energy. However, it is also set to still to be a corporate profit-driven agenda, rather than one owned by and to the benefit of the working class.

Both the South African president’s energy plan and the American IRA may be necessary compromises in the moment. But if we want to see a more progressive energy and climate justice future, then we need to work strengthen the Left and build the political power needed for more radical change.