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Eskom's darkest hour
| Date: |
27 January 2008 07:00 |
| Producer: |
Susan Purèn
Michael Duffett
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| Presenter: |
Derek Watts
Bonita Nuttall
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| Researcher: |
Amalia Christoforou
Michelle Lippert
Lindile Mpanza
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| Show: | Carte Blanche |
Part 1
Man 1: 'What did South Africa have before it had candles? Electricity.'
Or Eskom, for that matter. You can laugh or you can cry but our country is in crisis. Rolling blackouts, load shedding or simply power cuts. Call it what you want, but over the past two weeks South Africans had to brace themselves.
Journalist: 'How has load shedding affected you?'
Man 2: 'It has been absolutely devastating [The power goes out]. What more can I say?'
Woman 1: 'I would like a loaf of bread if I may please?'
Woman 2: 'Unfortunately, after all these outages we've had, my bread has been destroyed.
Man 3: 'It's frustrating. It is totally damn frustrating.'
Man 4: 'No power, no money.'
Nothing could prepare us for this kind of chaos and it's said this is just the beginning.
Derek Watts (Carte Blanche presenter): 'The end of the rolling blackouts is hardly in sight and it's going to take years to get back on track. Some say eight, others predict that we won't have power for the people' until 2025.'
The nation is angry. In Pretoria commuters set a train alight to show their frustration.
Woman 3: 'We are suffering in South Africa now.'
Man 5: 'It is absolutely ridiculous. You go out at 12 or 1 o'clock [for lunch] and you cannot do that either.'
Woman 4: 'This is our lunchtime. We cannot serve anything. We have to show away customers. We are losing a lot of money.'
Criminals are having a field day, and even Cape Town's famous cable car ground to a halt in mid air, leaving people terrified.
Predictably, government had its script prepared.
Alec Irwin (Minister of Public Enterprises): 'The underlying problem is the very significant rise in demand - particularly over the past few years - resulting from an economy working at full capacity, the rising standards of living with close on 3.5 million homes having access to electricity since 1994. In this sense, we are the victims of our own success.'
And the solution is easy, says Eskom's CEO Jacob Maroga, 'Just save electricity'.
Jacob Maroga (CEO Eskom): 'So load-shedding is not something we want to do frequently. However, we have got a lever that we can pull that will help all of us and the lever is reducing demand.'
Consumers should cut down on electricity because Eskom is unable to do its job? For at least the next five years? Is it really as simple as this, Mr Maroga?
Dr Azar Jammine (Economist): 'The fear is that it will limit the growth of the South African to well below the six percent to which government has been aspiring.'
Dr Azar Jammine is a senior economist at Econometrix. He's deeply concerned.
Azar: 'That level was required to try and produce enough jobs to halve the level of unemployment by 2014.'
Derek: 'Eskom's CEO, Jacob Maroga was not prepared to grant us an interview. Instead they gave us Dr Steve Lennon, Director of Corporate Services.'
Derek: 'Light of our lives to enemy of the state€¦ what has it been like over the last couple of weeks?'
Dr Steve Lennon (Director of Corporate Services, Eskom): 'It's been hard. Eskom is very proud about what it has contributed to the country. But we also have experienced the pain of everyone without electricity.'
Derek: 'The latest casualty the gold mines?'
Steve: 'Yesterday, we got to the stage where we said the integrity of the national system is at risk. Now the implications of that are severe. The alternative was a national blackout.'
But just how did we reach this meltdown? And why did it happen so suddenly?
Well, actually it didn't.
Derek: 'Warnings of a dark future were clear and accurate. A White Paper of 1998 said that the country would run out of electricity by 2007. Now, despite the dire prediction, it was never acted upon.'
In 2004 the department of minerals and energy invited proposals to meet the need for approximately 1000MW required annually from 2007. But the private sector wasn't very interested, because Eskom wanted to retain at least 70 percent of generation and dominate the market.
On Friday minister Alec Irvin admitted that had been a mistake.
Alec: 'We took the decision to charge Eskom with providing 70 percent of new capacity. As I have indicated, we accept in hindsight that the decision was too late. It is the underlying reason for the conditions with which we are now faced.'
Experts say when Eskom finally started preparing to meet the challenge of expansion, they found the expertise and experience within the utility wanting.
But, they had been warned about this.
Derek: 'That warning came from trade union Solidarity. At the beginning of 2006 they conducted a survey amongst their Eskom members and it emerged strongly that aging and badly maintained power stations and a major skills shortage would lead to a power crisis in the next few years.'
Jaco Kleynhans (Solidarity): 'No one wanted to acknowledge the problem. We said it.'
Jaco Kleynhans is Solidarity's spokesperson. He says the report was made public and given to Eskom.
Jaco: 'We sent it to the government - at that stage, to Mr Alec Irwin. He knew about that. The statistics coming out of Eskom themselves said that they had seen the problem and that there was not enough people to do the work and not enough technical people to fix the problems. Those were the statistics that we gave to them two years ago. So it was on the table. It is not something new.'
And in the past week Eskom finally admitted that it has a severe skills shortage, saying its workforce has dropped from 60 000 to less than half of that.
Jaco: 'Those people who left were highly skilled and also highly experienced people. The problem is that you cannot just replace them within a day or two.'
Derek: 'You've lost a lot of skilled workers and then suddenly you have to expand at such a rate. Let's be honest, you need skills now and where are you going to find them?'
Steve: 'We have got about 4 700 candidates in our skills pipeline, which will come into the organisation. Those are artisans and scientists. We have been on international recruitment drives. All of this is aimed at getting the skills we need into the business.'
Derek: 'Steve, why did it take Eskom so long to admit that there was such a severe skills shortage?'
Steve: 'That particular statement relating to the shortages of skills we have at Eskom relates to research and development and innovation environment in Eskom to cater for the sudden burst of innovation we need.'
Derek: 'But you have got less than half of the staff you had 15 years ago?'
Steve: 'Yes, and that just shows how inefficient Eskom was 15 years ago.'
Derek: 'But at least they were producing enough power. They had an excess capacity.'
Steve: 'They had an excess capacity and you can argue that: is an excess capacity better than a shortage? Both of them are negative.'
Alec: 'The argument that there has been a loss of skills is really, in our view, trying to score a political point.'
But what about affirmative action? This man is an engineer with more than 15 years experience, but he left Eskom when he was told that as a white male he could never be promoted.
Former employee 1: 'I didn't believe there was much of a future for a white male in Eskom. The way affirmative action was applied, and I believe still is, does not offer any opportunities to stay there and give your best.'
Jaco: 'Eskom is probably one of the companies in the country driving affirmative action the hardest. You can drive the issue if you can get the people with the right skills and the right knowledge to do the work. Eskom didn't do that.'
This letter from Eskom's HR department, dated 16 January this year, clearly spells out the policy stating: 'No white male appointments for the rest of the financial year.'
The effect of the rolling blackouts on business is profound.
Steven Maresch (Restaurant owner): 'We have got to trade. We have got to pay rent at the end of the month. We have to cook under extreme conditions. We may have the odd emergency light, but we still have no extraction. You can imagine 15 or 20 steaks braaiing in your lounge. That is really what it amounts to.'
One person who is particularly upset is impresario, Peter Toerien, the producer of the hit musical, The Lion King.
Peter Toerien (Impresario): 'We've lost one performance. It happened on a Thursday evening - a cold wet and horrible Thursday evening in Johannesburg. Of course, nobody knew. Nobody knew when it was going to happen. Nobody knew when the power was going to come on again. So we had nearly 2 000 people outside in the cold and the rain waiting for the show to start and, of course, it never started.'
A matinee was hastily arranged, but Peter had to pay out R250 000 to those who were unable to attend.
Peter: 'I'm only grateful that it started at the end of 'The Lion King' and not at the start, because it could have caused the show to shut weeks and weeks ago and put us many millions in the red. We felt particularly bad about all the people that flew up to Johannesburg. On that night it was 186 people and we said to them, Right, go straight to Eskom and demand the money for your air tickets back from them'.'
Jeremy MacKintosh heads up a packaging company that produces - amongst other things - millions of plastic milk bottles for South Africa.
The company has been particularly hard hit by blackouts, which have a knock-on effect on the production line.
Jeremy MacKintosh (Businessman): 'During the two hour power cut the plastic in the machines is gradually cooling down. So at the end of the two hours we now sit with machines that have cold plastic, which is solidified. We have to reheat that plastic back to 220 degrees Celsius before we can start working. The machines have to be brought up to speed and then settle down. The entire process takes about three hours. So a two hour power cut equals five hours out of production.'
The company is losing about R4-million per week and Jeremy is angry.
Jeremy: 'We, for one, are saying: Is there any point in buying additional machines this year when we don't think we will have the power to run them? No machines equals no employment, so we are into a downward spiral.'
The current spate of blackouts started on Monday, 14 January and is still ongoing. The public has been told that it's due to a high consumer demand.
Or is the truth actually that Eskom's power production has reached an all time low?
This confidential report shows just that. On the 1 February last year - during the maintenance cycle - Eskom's output was more than 32 000MW. But this Thursday it spiralled to a debilitating low of 27 000MW.
When you examine this page, the reason becomes obvious. All these units were out of service.
The total capacity loss was over 9 000MW - enough to power three cities the size of Johannesburg.
Steve: 'We have unplanned outages. That is something that has been increasing slightly lately. Although the incidents of unplanned outages of Eskom plants is still very, very good when we compare it to international benchmarks.'
Really?
Dr Ian McRay was Eskom's CEO between 1985 and 1994. He's spent 50 years of his life in the electricity supply industry and he couldn't believe the figures we showed him.
Dr Ian McRay (Former Eskom CEO): 'Well, that's a large capacity. That is the equivalent of virtually three large power stations. I was unaware it was to that extent. If you are having those kinds of losses you need to worry a lot more about it.'
According to the confidential report, the most prominent reason for unplanned outages seems to be wet coal. On Thursday coal problems were given as the reason for breakdowns at more than 20 power stations. Almost 4 000MW were lost - enough to power up Johannesburg.
Dr McRay: 'I mean, we've had wet coal for years.'
Chris Badenhorst (Transporter): 'Damp coal cannot cause a problem because the stockpile is in the open.'
Chris Badenhorst has worked with coal for most of his life.
Chris: 'It rains every year. Every summer all the coal gets wet and they have never had a problem before: why should they have a problem now? Coal burns better when it's wet than when it's dry.'
Bonita Nuttall (Carte Blanche presenter): Maybe the problem is not wet coal, but rather a lack of coal. Carte Blanche was tipped off by a contractor whose job at present is coal management at power stations. He said the story about wet coal is 'rubbish' and that coal supplies are in a chaotic state.
On Thursday I joined Chris Badenhorst who has 20 years of experience in coal transport. Chris used to transport coal to the massive Tuthuka and Majuba power stations which, between them, generate 20 percent of the country's electricity. He says the stockpile of coal here at Majuba used to be 25 metres high until about four years ago. This is the storage site which was used to stockpile coal in the past. On Thursday this week it was visibly barren as we flew past it. There were only a few trucks offloading coal directly onto the conveyor belt leading to the furnaces.
Chris: 'We need 46 days' worth of stock, which is in the region of 2.3 million tonnes of stock. Now there is nothing. The fires are too small. You cannot create a big enough fire to create enough steam to generate enough electricity.'
Bonita Nuttall (Carte Blanche presenter): 'So what does that mean?'
Chris: 'There is not enough electricity. That is why we are having blackouts.'
Wouter Wolmerans used to deliver coal by truck to Majuba.
Wouter Wolmerans (Transporter): 'There was always a lot of coal and a lot of trucks€¦ like 300 trucks standing there to offload coal. Tuthuka had a big stockpile - I would say about 400m long, 60m wide by 30m high.'
When we flew past nearby Tuthuka power station there appeared to be no stockpile of coal. All that remains is a black stained stretch of land. However, Eskom's Steve Lennon insists that wet coal remains a major problem and, when pressed to supply Carte Blanche with figures of the actual stockpiles at the power stations, he declined.
Derek: 'Can you give us a print-out of how much coal is being delivered to those stations?'
Steve: 'We can give you the big picture on coal, but to give you the detail on every single power station and the coal situation is not our policy.'
Derek: 'Why not?'
Steve: 'Because there is obviously security issues that relate to the security of the supply to those power stations. But what I can say is that we have never been in the situation where our stockpiles have gotten to a zero or negative situation.'
But where are those coal stocks?
Let's go back to 2004. That year Eskom cancelled many existing transport contracts and handed over the job to ten BEE companies, many with little experience in transport. According to Chris, one of the contractors was an interior decorator. Eskom paid the contractors 43 cents per tonne of coal per kilometre and they paid their sub-contractors 40 cents per tonne.
Chris: 'There were major problems as the rates were too low. I said to them, 'Look, if you don't pay higher rates to make it feasible for the guys they will go into liquidation'. They will go bankrupt. They will not have enough trucks to supply the coal because they are already short of trucks to supply the coal and this is going to happen.'
Chris's prediction was spot on and the new transporters soon began to feel the pinch. The 40 cents per tonne was simply not enough for the subcontractors. Atrocious roads, which led to many breakdowns, didn't help their cause.
Chris: 'We complained with Eskom on the dirt road to the one mine. That road is very bad and the maintenance cost is very high. They must repair the road. They couldn't get somebody to repair the road and they asked us to do it. We repaired the road twice but we didn't get paid. Thereafter we refused. We were not going to repair the road again. A couple of weeks later the farmers decided that the road is getting so bad that the farmers closed the road. After they closed the road, within a matter of six hours Eskom signed a deal with the farmers that they must repair the road. Within a couple of days the road was repaired and has been maintained ever since.'
Wouter and his father, who were subcontracted to Chris, went bankrupt as they could not survive at 40 cents per kilometre.
Wouter: 'The diesel prices went up by 80 percent in the period of a year. We had a lot of breakdowns then. Out of 27 trucks, if you only had 20 breakdowns a day you were lucky. Your overheads were more than your income. There was no way you could survive.'
Chris, who himself was BEE compliant, became the spokesperson for the ten contractors and repeatedly asked Eskom to raise the rate.
Chris: 'If a vehicle earns R100 you cannot pay R200 worth of debt a month. It is not going to work. They didn't want to listen, the companies went bankrupt, the trucks are gone and that is the problem.'
Derek: 'A lot of these subcontractors went out of business.'
Steve: 'Well, I think the process that Eskom applies, whether it is for a tonne of coal or for a tonne of coal to be transported, there is a standard commercial process that is applied. That is the way we run our contracts.'
Part 2
Eskom is Africa's biggest power producer. Under favourable circumstances it can generate around 40 000MW. Over the past ten years the utility giant has pocketed enormous profits. In 2006 this amounted to R6.45-billion, an increase of 39 percent from 2005. However, very little was ploughed back into infrastructure renewal and maintenance.
Yet, the previous CEO Thulane Gcabashe received a R13-million bonus and walked away with another R6-million when he left.
[Carte Blanche, 26 Feb 2006] Thulani Gcabashe (Former Eskom CEO): 'I think as a management team we have always given our very best. We are a bunch of honest, hardworking people.'
[Carte Blanche, 26 Feb 2006] Moky Makura (Carte Blanche presenter): 'So you are saying that the salaries you earned are not excessive?'
[Carte Blanche, 26 Feb 2006] Thulani: 'I would not say they are excessive. I would say they are market related.'
Over the past three years the 24 member board was paid R35-million, while non-executive directors got R4.7-million. Current CEO Jacob Maroga received R3-million in his former position as head of the Transmission Division. Remarkably, these massive amounts were paid while the current power problems were looming.
Derek Watts (Carte Blanche presenter): 'Steve, a direct question - do the directors of Eskom deserve bonuses of R57-million for plunging us into the dark ages?'
Dr Steve Lennon (Director Corporate Services: Eskom): 'We are totally transparent about how these remunerations are determined and you can see that in our annual report.'
Derek: 'But is it based on performance? Because, if it is based on performance, how on earth do they deserve R57-million? I cannot understand it.'
Steve: 'What you have to look at is the awards that Eskom has received. That is why I say it hurts us so much.'
Derek: 'But what good are awards, Steve, when we have got no power? Surely, that is performance producing electricity?'
Steve: 'Absolutely.'
Derek: 'So why do they deserve R57-million?'
Steve: 'It is our goal to continue to produce electricity.'
That may be so, but will it be enough to steer this country away from free falling?
After all, Eskom's Finance Director, Bongani Nqwababa, told Government last week to ward off investors - both foreign and local - until 2013 because of Eskom's inability to guarantee an adequate supply power.
The Cape Town Chamber of Commerce and Industry was incensed by this comment.
Albert Schuitmaker (Ex. Dir. Cape Town Chamber of Commerce and Industry): 'We are very concerned about that statement. We think it is a shocking statement. Yes, investors and companies that will rely on electricity will look very carefully at the situation in South Africa at the moment with the power supply as it is. But there are many other factors, which make companies invest in South Africa and put their plants here and put their offices here. It is not only around the electricity side. So I believe we must be careful when we make these comments.'
Dr Azar Jammine (Chief Economist, Econometrics): 'Eskom's comments I think are very unfortunate from a psychological angle, almost telling foreign investors not to come to this country. But at the same time it is a realistic comment. You can't have foreign companies investing in the country in activities which require huge amounts of electricity when you know you won't be able to supply them with that electricity.'
On Friday Eskom did the unthinkable. They requested South Africa's pride - our goldmines - to reduce their load to the minimum levels, effectively shutting them down. Reports quoted a loss to Harmony of R 60-million in one day. Close to half a million jobs in the mining sector are directly at risk.
The same goes for the Eastern Cape.
[Carte Blanche, 28 May 2000] Derek: 'The Eastern Cape is the second poorest of South Africa's nine provinces. It is estimated that about half the population is unemployed and that about three quarters live below the poverty line. But there is a major industrial development that is promising to alleviate the situation. It is called Coega.'
Now Eskom may have put a stop to all of this because they can't provide electricity to power the project. They say it's cheaper to pay the penalty fees.
Azar: 'This will have a devastating effect, not only in terms of job creation but in terms of the entire psyche of that region.'
The man in the street is already feeling the pinch. These waiters won't be getting their tips if meals are not served.
Waitress: 'Electricity is needed to make money. If there is no electricity, there is nothing to eat, which means no customers. So Eskom must do something.'
Man 1: 'Yes, the power has caused problems for us. We have been struggling to get the work done.'
Man 2: 'People are talking about leaving. People are talking about, once again, other countries.'
Right across the board businesses are now having to rethink future plans as rolling blackouts brought the whole of South Africa to a virtual standstill. Nowhere is it more evident than in Gauteng.
Australian-born Barry Holfeld may have to move his business elsewhere. Barry's small manufacturing company was originally financed by the Small Business Development Corporation and initially operated from tiny premises.
Barry Holfeld (Businessman): 'I decided to move and build my own factory because I needed more power. The power was limited, so I built this over here [indicates new factory site].'
Barry employs 200 people who work around the clock in shifts. His factory, which is environmentally friendly, produces special metal cushioning for the mining industry.
Barry: 'Welding with CO2 causes too much damage to the environment. We have developed a product that is welded electronically called seam welding. It does use quite a lot of power, but it is much cleaner. The products are cheaper and more efficient for the mining industry.'
Having already lost millions, Barry has done the sums on alternate power sources.
Barry: 'We just requested prices on transformers. A transformer for this company would be about R1.3-million. It would use about 600 000 litres of diesel a month at a cost of almost a million rand. So it does not seem viable for us to put in a transformer. The other option is to look to manufacture our products offshore in Spain or in China, where I went to last year. Or in India that has a growing economy and plenty of power. But that would go against what we are trying to do. What we are trying to do is to create employment in South Africa.'
Johannesburg's electricity is distributed by City Power. The city's demand peaked at 3 400MW during winter last year, says MD Silas Zimu.
Silas Zimu (MD, City Power): 'It doesn't sound that big because, when you think of it, we don't have very big industries. But our domestic houses use a lot. It is the same as Paris. Paris peaked at 3 200MW last year.'
And this is where those crucial decisions are made - which suburb has power and which one has not.{Office and chart on screen]. Security is very tight and we were asked to protect the identities of the people who are working here.
Derek: 'If you suffer load shedding, if your power is cut off, it's not with huge red levers or a big red button. It's done here at City Power, with a touch of a mouse.'
This may be avoided in future if the city implements the use of a gadget that automatically switches off a geyser.
Silas: 'On a day like today, where Eskom has asked us to load shed 210MW, we would - by just switching off the geysers - be able to say, 'Yes, we have switched off 210 off the network, but please don't load shed us'. Meaning you will still be able to cook, you will still be able to have light and you will still be able to bath, because that geyser should be warm enough for more than three hours.'
City Power also plans to generate some of its own electricity using massive mobile generators and to tweak the output of the Kelvin power station on the outskirts of the city.
Derek: 'Kelvin power station is a private venture, out of the Eskom fold. It seemed destined to be a white elephant and now it's a great grey hope. It's been rapidly refurbished with the aim of producing between 300 and 400MW. But this is just for the Johannesburg network. After all, the city's meant to be the economic hub of Africa.'
But that didn't count too much during the past two weeks. Eskom continued exporting electricity to neighbouring countries while large parts of Jo'burg had none. This despite an undertaking by Eskom that it is cutting on supply.
Derek: 'Steve, are we still delivering electricity to our neighbouring territories?'
Steve: 'Yes, we are still delivering when we have electricity available. Most of our neighbouring countries are on what we have called 'unfirm' agreements. In other words, if we don't have it we don't deliver.'
Derek: 'This week who did you supply to?'
Steve: 'This week we would have supplied to most of our neighbouring states, Mozambique, Botswana...'
Derek: 'This week?'
Steve: 'When we are not load shedding, yes.'
Derek: 'But your CEO said on Monday on SABC that you are no longer exporting to our neighbours.'
Steve: 'No, the point is€¦'
Derek: 'He did say that!'
Steve: 'The point is that we are not a net exporter of electricity. We import electricity mostly from Botswana and we export it to our neighbouring states.'
Derek: 'But we helped set up most of those schemes€¦ so it is just a territorial import, if you know what I am saying.'
This diagram from Eskom's intranet is for internal use only. It shows the megawatts that Eskom exports at a specific time to South Africa's neighbouring states. This week, while our gold mines were shut down, Eskom sent 761MW to the MOZAL aluminium smelter in Maputo.
At the same time, Swaziland was receiving 476MW, Botswana 103MW, Namibia 126MW and Zimbabwe 51MW.
Added up, this is more than 1 500MW€¦ six times the amount that Johannesburg was forced to load shed daily.
We confirmed this information with the power utilities in two of our neighbouring countries.
Call to NAMPOWER in Namibia: 'How much electricity is being supplied to Namibia from our country?'
NAMPOWER: 'How much electricity is supplied?'
Call to NAMPOWER in Namibia: 'Yes.'
NAMPOWER: 'There is no fixed figure.'
BPC: 'Yes, we have a new contract with Eskom. We started on 5 January 2008.'
Call To BPC in Botswana: 'I see€¦ a five year contract?
BPC: 'A five year contract. It's about 350MW... we get 350 now instead of 410 ... about 350MW.'
Derek: 'Your CEO said on Monday that you are no longer exporting to our neighbours. But now you say that you have been all along?'
Steve: 'I am saying that Eskom is a net importer of electricity.'
Derek: 'That is not my question. The question is: are you supplying? Because your CEO says that you are not! I think Solidarity is right €¦ that you keep on giving different answers.'
Steve: 'Well, that is not right if you contextualise what our CEO actually said and actually listen to what he said. He spoke very specifically about the fact that we are not exporting to our neighbouring states when we are unable to meet the demands of electricity in South Africa.'
Derek: 'He didn't qualify it. He just said that we are no longer exporting.'
Steve: 'I think that is subject to interpretation.'
IMPORTANT DISCLAIMER:While every attempt has been made to ensure this transcript or summary is accurate, Carte Blanche or its agents cannot be held liable for any claims arising out of inaccuracies caused by human error or electronic fault. This transcript was typed from a transcription recording unit and not from an original script, so due to the possibility of mishearing and the difficulty, in some cases, of identifying individual speakers, errors cannot be ruled out.
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