[TOP STORY] ‘Not only are we asking for trouble, we are actively inviting it’

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SIMON BROWN: I’m chatting with Bonang Mohale. He is president of Business Unity South Africa, chancellor of the University of the Free State, and a ton else. We won’t go into the rest of the CV. We would run out of time. I really appreciate the time to chat again. Talking Davos, the World Economic Forum – is it still the big event? It seemed quieter this year, but maybe that’s because there’s so much else sort of hogging limelight. I’m thinking of the war in Europe, the energy crisis and inflation and interest rates. How big is Davos still in the globe?

BONANG MOHALE: You are absolutely correct. I decided to attend it online rather than in person. My excuse is that I’m afraid of the XBB.1.5 (Covid-19 variant).

But  this year’s World Economic Forum had six major themes which will foster action-oriented dialogue on some of the most crucial imperatives. I’m lucky because I’ve been intimately involved because I’m a member of the Committee of Chairpersons of the World Economic Forum.

Number one on that list was the future of global cooperation. The second was the economic outlook. The third was building healthy and equitable societies. The fourth was about safeguarding the planet. The penultimate one was about transforming industry, and [six was] enhancing technology governance.

So over and above the normal top 10 global risks – and those were the usual, the cost of living crisis, the natural disasters and extreme weather events, geo-economic confrontation, failure to mitigate climate change, the erosion of social cohesion and societal polarisation, large-scale environmental damage incidents – they even looked at the failure of climate change adaptation, widespread cybercrime, and also cyber insecurity. They mixed it with natural resource crises and of course large-scale involuntary migration.

But what I actually enjoyed, Simon, was the fact that they also identified the top 10 – and let me just mention the top six – risks facing South Africa. Funnily enough, at the top was state collapse, number two was debt crisis, three was the collapse of services and public infrastructure, the fourth is the cost of living crisis, the penultimate one is employment and livelihood crisis, and the last is illegal immigration.

So for me, if I put all of them together, 29 years into democracy the country of course has 1 001 challenges, often with conflicting priorities. But maybe out of the top 10, let me just conclude, Simon, by articulating only four of these.

Number one for me on that list of course will have to be state capture. Number two should be youth unemployment, because at 74.9% you have young women and men of military age who are sitting at home twiddling their thumbs with nothing to do.

Not only are we asking for trouble, we are actively inviting it.

But also [there is] this notion of a stable, reliable, and predictable energy supply – not just our obsession with Eskom. And of course, the last one I would call is the lack of, or inability, or even unwillingness to implement the structural economic reforms that we’ve been talking about probably for the last 15 years, Simon my dear brother.

SIMON BROWN: Yes. And when you put them together, it paints a scary picture. How was South Africa received? The president was obviously not there. He stayed at home because of load shedding. I remember in years gone by, if we go back to President Mandela, even President Mbeki – and President Zuma to a degree as well – a large delegation of South Africans [went to Davos] almost shooting above our weight in terms of us being a small economy globally, although a significant player in Sub- Saharan Africa.

BONANG MOHALE: In fact, what you say is absolutely correct. You see it by the disproportionate number of South Africans who serve on the committees of the World Economic Forum. You see it in the disproportionate position place that South Africa holds even in World Economic [Forum on] Africa, the African chapter, the first four we held at the ICC in Durban. For the sixth we went to Maputo, and all of it was organised 80% by South Africans.

But you also see it with South Africa House. Whenever there’s a dinner, there will be standing room only. When we had President Jacob Zuma, there was one year it was only him and we as business, no one else. Then we sat down and said, by the way, what are we going to say to the investors? That’s when we decided when [coming] back to meet regularly with the then sitting president, who identified five issues that we were going to work on, each chaired by two CEOs, so 10 in total.

Among those [issues would] be things like unanticipated consequences of policy changes. The second and most important was a whole committee chaired by Simpiwe Tshabalala, the current group CEO of Standard Bank, [on] how to avoid downgrading by Moody’s at that time.

So for me, 29 years into democracy, Simon, the issue that is confronting us today is load shedding. And for me I say ‘load shedding’ because this is what started in February of 2008. Fifteen years later we have not solved it.

The country’s power system we know has about six gigawatts of effective capacity shortfall, resulting in the worst levels of load shedding in history, with substantial economic costs. For me, the primary driving factor for this crisis is both the declining performance of the Eskom fleet with the energy availability factor having decreased to less than half. At one instance it was 49%. The good chairperson of Eskom Ntate Mpho Makwana says it’s now 56%.

The second [thing] is delays in the procurement of new capacity. So when one looks at the status of independent power producers, the procurement programmes for December 2011 to January 2023, the country has had seven, because remember there was Bid Window 3, and Bid Window 3.5 – I don’t know why – with 136 preferred bidders appointed with about 13 000 megawatts, of which almost 7 200 are operational, and 2 700 still in construction that were already procured. But also [there were] 116 projects with signed agreements and the estimated timeline to be online was estimated at about June 2023 to June 2027. Remember, there’s 18 to 24 months from agreement of Bid Window 6 being concluded until we actually wheel this into the transmission lines, Simon.

SIMON BROWN: Yes. And that’s part of the criticism in South Africa – that we talk and we have crisis committees, and nothing comes of it. It’s also a criticism of Davos sometimes, the Word Economic Forum, lots of talking. But it’s the doing that matters. I don’t know. It seems to be something that we as a country are perhaps poor at but, when I look at COP 27 for example, [it is] a bit of a global problem as well.

BONANG MOHALE: But you see Simon, you have hit the nail on the head. Remember the president cut his visit to Sharm El Sheikh (for COP27) in Egypt short, when we hit Stage 6 load shedding for the second time, to come and solve the load shedding problem.

But after two conversations with stakeholders to tackle this problem, the president has outlined five interventions that are aimed at improving the performance of Eskom’s existing fleet of power stations. Number one on that list was: how can we accelerate the procurement of new generation capacity? Two was can we massively increase private investment in generation capacity? The third was can we enable businesses and households to invest in rooftop solar, fundamentally transforming the electricity sector? And the last one was positioning it for future sustainability, which the National Energy Crisis Committee, Necom, is addressing across nine working streams, over and above several initiatives that are being led by business.

However, levels of cooperation and collaboration can be hugely improved. So with the president having cancelled his participation now at the World Economic Forum in Davos, we were told that it was due to Eskom having declared Stage 6, probably for the umpteenth time, for an indefinite period due to a high number of breakdowns since midnight on Tuesday,  January 10, as well as the requirement to strictly preserve the remaining emergency generation reserves.

So the year could not have started on a more catastrophic note, because, you see, if Stage 6 is maintained for a 24[-hour] period, most people will have their electricity turned off for six hours per day. But you and I know we have family members who on average are being switched off for 10 hours. Eskom first implemented Stage 6 in December 2019 – a level of electricity rationing that had until then been strictly theoretical.

So imagine at Stage 6 Eskom estimates the average South African will be supplied with power for only half of the time – that’s 50% – with connections off for up to 12 hours out of every 24 hours. So at every stage of load shedding Eskom rations the country by a further 1 000 megawatts of power. This is the equivalent of one million kilowatts, or if I put it simply, one million kettles being boiled.

So the Department of Energy and the National Energy Regulator of South Africa, so the DoE and Nersa, use a measure called the ‘cost of unserved energy’. This is currently estimated to be about R85 per kilowatt hour.

Based on this, the cost to the economy of an hour of Stage 6 load shedding during business hours is R500 million. So load shedding cost the South African economy R560 billion in 2022.

And you can see [that] even the Council for Scientific and Industrial Research is absolutely concerned about this. This for me means that there was a total of probably 6 400 gigawatt hours of unserved energy in the country.

So at Stage 6 the cost is about R4 billion per day, which wipes off an entire one percentage point of GDP per annum, Simon.

SIMON BROWN: And the finance minister should find the money for the diesel. But we’ll leave that for a different day. We’ll leave it there. We are out of time.

Bonang Mohale, president of Business Unity South Africa, chancellor of the  University of the Free State, I always appreciate your time.

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