Budget 2021

Energy production a laggard in our recovery hopes, budget shows

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Eskom se Kusile-kragstasie in Mpumalanga. Foto: Getty Images
Eskom se Kusile-kragstasie in Mpumalanga. Foto: Getty Images

  • There were lower levels of electricity use in 2020 as a result of the lockdown, since businesses consuming high amounts of electricity were not operating.
  • Urgent reforms were introduced to alleviate energy constraints and reducing administrative burden on projects under 50 MW.
  • Infrastructure projects in the pipeline for the year also needed urgent attention, such as roads, water and ICT initiatives.



Finance Minister Tito Mboweni said in his 2021 Budget Speech that energy reforms were afoot to assist Eskom with improving its capacity to provide electricity for the South African economy to continue functioning through the Covid-19 pandemic.

Last year South Africa experienced its worst year on record in terms of load shedding, as the penny dropped to find that Eskom was unable to even provide reliable, uninterrupted electricity to an economy that was operating below optimum levels due to national lockdown.

An annexure in the Budget Review compares the difference in energy sent out between 2020 and 2019 and indicates lower levels of electricity use in 2020 as a result of the lockdown, since businesses that consume a high percentage of electricity were not operating.

"Despite reduced economic activity, Eskom has been unable to meet demand. In 2020, load shedding reached the highest levels since 2015, with a cumulative 52 days of Eskom power cuts (relative to 103 in 2015)," the review said.

The Budget had a provisional allocation estimate of R23 billion for Eskom to go towards the restructuring of the utility for 2021/22, followed by R21.8 billion in the 2022/23 financial year and R21 billion in the 2023/24 financial year.

Electricity availability low

The Budget Review said the electricity availability factor remained below 2019 levels to average 65%, relative to 67% in 2019. The review said this reflects a deterioration in plant performance.

"Eskom is implementing a maintenance programme to improve generation performance, but significant improvements are only expected by September 2021. As economic activity resumes, unreliable electricity supply is constraining recovery," the review said.

The review said urgent reforms are required to alleviate energy constraints, including reducing the administrative burden for generation projects under 50 MW, ensuring projects do not pose risks to the stability of the grid and fast-tracking procurement of additional electricity in line with the Integrated Resource Plan 2019.

Other bulk infrastructure projects in the pipeline for the year also needed urgent attention, such as roads, water and ICT initiatives.

Road infrastructure expenditure is expected to grow at an average annual growth rate of 8.2% from R86.5 billion in the 2020/21 financial year to R109.5 billion in the 2023/24 financial year, largely due to underspending on capital expenditure programmes in 2020/21.

"To fund new bulk water projects and maintain raw water infrastructure, spending on national water resource management is expected to grow from R28.6 billion in 2020/21 to R30 billion in 2023/24. Planned expenditure over the medium term includes phase 2 of the Lesotho Highlands Water Project and the Mokolo Crocodile Water Augmentation Project," the review said.

The Budget Review also mentioned the Independent Communications Authority of South Africa auction of high-demand spectrum, which seeks to unlock spectrum currently taken up by broadcasting for high-speed internet.

"The Universal Services Access Agency of South Africa will issue vouchers to 2.8 million low-income households by 31 March 2022, to allow analogue televisions to receive digital signals," the Budget Review said.

While tabling the national budget on Wednesday, the minister addressed the power utility's growing debt burden, which is nearing half a trillion rand. Social partners of the national Economic Development and Labour Council last year agreed to a plan to help restructure Eskom's debt.

Apart from financial challenges - the power utility has been suffering both operational and financial challenges. It has implemented load shedding in recent weeks as it has lost generation capacity amid implementing a long-term or reliability maintenance programme of power stations.

Eskom CEO André de Ruyter has said that the risk of load shedding could be significantly reduced by September 2021 when the reliability maintenance programme comes to an end.

The successful bidders of 2 000 MW of the emergency power procurement programme will be announced soon – this power is set to come on-stream in 2022.

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