ANALYSIS | Hard questions remain about Ramaphosa’s load shedding plan

Business Insider SA
President Cyril Ramaphosa speaking at the Black Industrialists and Exporters Conference at the Sandton International Convention Centre in Johannesburg, on 20 July 2022. (Photo: GCIS)
President Cyril Ramaphosa speaking at the Black Industrialists and Exporters Conference at the Sandton International Convention Centre in Johannesburg, on 20 July 2022. (Photo: GCIS)

News analysis

  • President Cyril Ramaphosa has announced the package of immediate steps that will help stop load shedding.
  • Some are simple and obvious enough that they have drawn no real criticism.
  • Others deal with complex problems that have long haunted Eskom – without any substance.
  • Here are three big questions that remain around Ramaphosa's load shedding plan.
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On Monday night, President Cyril Ramaphosa (finally) announced the package of interventions that "will hasten the end of load shedding".

Some of the steps he announced were met with general enthusiasm, and some associated criticism about why it took so long: promises to cut red tape in Eskom procurement, to reduce the demand for local content in much-needed new power projects, and to remove an upper limit to how much electricity businesses may generate for themselves.

Phrases such as "a pragmatic approach" and "on schedule" resonated well.

But some parts of Ramaphosa's plan promise to slice clean through longstanding, fundamental problems, with no indication that anything has really changed. 

Here are three promises Ramaphosa made, and why they are troubling. 

Eskom "will increase the budget allocated for critical maintenance". With what money?

Eskom has often, and loudly, and for more than a decade, complained about its lack of money.

It has blamed the National Energy Regulator (Nersa) for not granting it large enough tariff increases, it has blamed cost overruns on projects such as Medupi, it has blamed the size and structure of its debt, it has blamed municipalities that don't pay their debts.

Through three major shakeups in management, Eskom has held that its general lack of money is felt acutely when it comes to maintenance.

So how will Eskom now, after all this time, rejig its budget to find the money needed for critical maintenance? Ramaphosa didn't say.

The "sustainable solution to Eskom’s debt" will be announced in October. Will funders believe it?

International talks about moving some of Eskom's debt off its balance sheet – probably around R200 billion worth – have been going on since at least February. Earlier this month, National Treasury sought out lawyers to help with the process. (Although, at the time, the phrase was a "credible solution").

So when Ramaphosa promised the Treasury will be putting forth the solution in less than three months, he is referencing something already well underway.

What Ramaphosa did not mention was how current and future funders have reacted to the idea.

Successive finance ministers have refused to lift a big chunk of Eskom's debt from its books and place the burden on the national account, because they did not believe relieving the pressure on the company would help it grow more sustainable. Instead, they seemed to concur, Eskom numbers that seemed more solid would have unions demand bigger increases, would make regulators kick harder against price increases, and would make it harder for all involved to get non-paying government departments and municipalities to cough up.

Instead of shifting Eskom's debt, those ministers offered bailouts that came with conditions, theoretically keeping more control over how Eskom operated while not obscuring the truth of its finances. Time and again, Eskom failed to meet those conditions.

Since the pandemic, South Africa's long slide into a precarious fiscal position has become steeper.

So how will investors and ratings agencies that are keeping South Africa in junk status react when they are told all those previous finance ministers were wrong, lifting the debt burden from Eskom will be perfectly fine, and this time the reforms will definitely work and Eskom will become viable?

There may a couple of sceptics.

SA will "import power... through the Southern African Power Pool". How much will that destabilise the neighbourhood?

The Southern African Power Pool (SAPP) is 27 years old, though for much of that history it was arguably less a pool and more a pipe connecting South Africa to Mozambique, though which SA sucked down power from the Cahora Bassa dam.

Regular data from SAPP shows how dependant some of its members are on the arrangement, with the likes of Lesotho and Eswatini simply incapable of generating enough electricity for their own needs.

SAPP numbers also show much it costs to import electricity in a region with a general shortage of generating capacity. In May, the average cost of peak-time electricity on the clearing market was R2.86 per kilowatt hour. When South Africa last asked for pricing for on-demand power on an emergency basis, bidders came in at an average of R1.68 per kilowatt hour.

Money may be tight for Eskom, but it can easily outbid the rest of the region for peak-time power, should it wish. That will destabilise the regional power market, and may mean darkness in some countries. So how far can and will South Africa go, politically, in securing imported power? We don't yet know.

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