New fears about power crisis
2008-09-30 17:11
Special Report
Eskom is set to seek a 34% hike in electricity tariffs, back from the 88% rise it had been considering due to the global economic slowdown, a newspaper says.
Johannesburg - A change at the helm of the ministry that controls South Africa's state utility Eskom may delay projects to expand electricity generation in a country gripped by a power crisis that will take years to resolve.
New President Kgalema Motlanthe surprised analysts by naming former justice minister Brigitte Mabandla to
the public enterprise department, which runs Eskom.
The utility has since January this year battled to keep the
lights on in South Africa after a near-collapse of its grid.
The rolling power cuts affected aluminium smelters and shut
gold and platinum mines, sending metal prices soaring, and by
some estimates cost Africa's biggest economy R50bn by August, slowing fast-paced economic growth.
The government offered a mea culpa, saying it ignored
warnings from experts to invest in new power generation. The
power crisis could last until 2013, but South Africa has said
plans to host the 2010 Soccer World Cup should be unaffected.
Analysts said Mabandla would have to get to grips with plans
to build a slew of new power stations and help Eskom raise cash
internationally, right in the middle of a global credit squeeze.
Her term will last seven months before scheduled general
elections, and there is little time for meaningful changes, and
worse still if a new minister is named after the polls, as it
may disrupt plans to handle the power crisis.
"I don't think we needed this kind of changes at this stage.
It will take her seven months just to settle," said Johan de
Kock, head of research at Metropolitan Asset Managers.
"I expect a delay of a couple of months if not more on
various decisions on contracts for expansions," he said.
Nuclear plant
One of the key tasks for Mabandla this year would be the
approval of huge deals to expand power generation, including a
new nuclear plant, which could be worth billions of dollars.
The market is watching to see how soon or if at all Mabandla
will give her approval to plans to build the country's second
nuclear power plant. France's Areva and US-based Westinghouse
Electric have bid for the contract.
Areva has said it expected a decision last week, but added
Mbeki's exit could have pushed back the timing.
"She has to walk in completely cold," Johan Botha, a senior
economist at Standard bank said.
"She won't put hand to paper to approve the big contracts
like the nuclear one before she has been fully briefed."
Mabandla was unavailable to comment. She has not publicly
spoken of her plans since she was sworn in on Friday.
South Africa's National Treasury, which has already
fast-tracked R60bn over the next three years to pay for Eskom's 343 billion rand, 5-year expansion.
Eskom has said it plans to get the extra cash from the
government, tariffs, the World Bank and global capital markets, and that a ratings downgrade by Moody's may hurt its chances.
Fani Zulu, Eskom's spokesperson, said Moody's downgrade of
Eskom would lessen the amount it can raise from capital markets,
but a roadshow in Europe showed there was still some appetite.
The new minister is expected to be briefed on Eskom soon.
Rock the boat
"She has to face foreign investors, and play the PR (public
relations) role for Eskom in attracting funds to the sector,"
Nicky Weimar, a senior economist at Nedbank said.
"The more she knows about the sector the better."
Analysts said there were plans for further Eskom changes,
and the minister may open the door for rivals to Eskom.
"There is some market talk of plans to move Eskom to the
Treasury, which understands funding issues, or house it under
the Department of Minerals and Energy," Botha said.
Weimar said despite her short time in office, Mabandla may
take a fresh look at Eskom's status as a monopoly.
"The minister drives policy," Weimar said. "She could review
public enterprises policy on generation or distribution, and end
its role as a monopoly."
Global Insight's senior economist Ronel Oberholzer said
moving Eskom elsewhere or changing the country's energy policy
would require rigorous debate. She said what most investors
wanted was a quicker end to the power shortage crisis.
"I can't see her trying to stir things up, she may try to
play it safe," Oberholzer said.
- Reuters
- Reuters