By Redge Nkosi
On Monday July 29, energy and electricity minister, Dr Kgosientso Ramokgopa addressed the media in regard to the ever rising electricity prices in South Africa.
He decried South Africa’s current electricity-pricing framework and called for its urgent reform.
Without giving any specifics, the minister assured the public that solutions to the runaway power prices will have to be found.
He acknowledged however that “there’s been an exponential rise in the cost of electricity. Our electricity pricing plan needs to kick in and that’s the primary preoccupation of the work of the ministry now working with Eskom; working with municipalities and working with SALGA.”
According to the Minister, South Africa must adopt a pricing framework; that takes care of the interest of the poor, and the marginalized, so that they are not denied access to electricity.
As well as to “protect the interest also of the affluent, so as to ensure a situation where the pricing structure is such that it becomes unaffordable over time”.
He correctly fears that such potentially unaffordable prices will become a competitive disadvantage for South African industries.
Minister Ramokgopa’s remarks are a step in the right direction because at the core of his remarks is climate justice premised in universal access to electricity for all especially the poor who have been at the receiving end of the net zero emissions and carbon free world “sustainable” climate goals.
But why is South Africa battling to provide reliable and cheap energy which is accessible to all?
South Africa should urgently look at its BRICS counterparts on how they manage their energy diplomacy which does not compromise their national interest nor antagonise their private sector.
South Africa's energy providers cannot afford to continue politicising and financialising energy provision which ultimately affects the pricing framework but more importantly, electricity accessibility and provision.
There is clearly a good case for renewable energy in both developed and developing economies however, the limitations of solar and wind energy have been glaring and are well known but not fully disclosed.
In industrialised countries like the United States of America, France, Japan and Germany clean energies are just like candles in the bigger scheme of their industrialisation project as these countries still heavily rely on coal, nuclear and hydrocarbons to generate power, hence they can afford to slowly phase in renewable energies.
There is also one big elephant in the energy pricing room.
Due to its complexity and beyond the reach of Treasury, the Departments of Trade and industry, Energy and the Reserve Bank, it is never mentioned.
It is the defunct nature of the South Africa’s macroeconomic framework.
It has a corrosive effect on Eskom’s pricing approach and Nersa’s considerations of tariffs as it is at the centre of the current economic malaise South Africa experiences.
It is here that I will give just one example as an illustration: India.
South Africa’s de-industrialisation, as is the escalating energy prices, is a consequence of an exceptionally poor fiscal and monetary policy frameworks.
Ramokgopa’s good intentions of reforming the energy pricing framework will have little effect on industry, the ordinary people and the economy.
The picture of how Eskom tariffs will be in years to come will explode beyond what is shown below due to Treasury and Reserve Bank poor macroeconomic management, that spill not only over to Eskom, but to other SOE’s and the economy at large. Here is how the India example, among many, comes into play.
India, a BRICS member State, the most populous nation in the world having overtaken China and the fifth largest economy is expected to build more than 18 nuclear reactors with 13.8GW of capacity by 2032 to add to its energy mix as announced by India Prime Minister Narendra Modi.
The financing of which involves state (public banks) and domestic commercial banks, with the Indian Reserve Bank well engaged in this national task.
Of course some bit of foreign aspects of it is included. India practices yield control, making debt reasonably priced. This is the way for a developing country that has national interest as its guiding rod.
In the 2024/25 Budget, India’s finance minister announced the involvement of private sector in atomic energy.
This is the first time in India’s history. But India is not uninformed about such involvement of the private sector.
The budget’s paragraph on nuclear development says: “Nuclear energy is expected to form a very significant part of the energy mix…. Towards that pursuit, our government will partner with the private sector for (1) setting up Bharat(India) Small Reactors, (2) research & development of Bharat(India) Small Modular Reactor, and (3) research & development of newer technologies for nuclear energy. The R&D funding announced in the interim budget will be made available for this sector”.
How the central government structures private sector involvement could be a case study for Minister Ramokgopa and Treasury, but most importantly how the country uses its macro levers to lower energy costs is of interest here and has cost and pricing implications for industry and the people(National interest).
It should be borne in mind here that only two government-owned enterprises – Nuclear Power Corporation of Indiua Ltd (NPCIL) and Bharatiya Nabhikiya Vidyut Nigam Limited (BHAVINI – established to build and operate fast reactors) are authorised to own and operate NPPs. India’s Atomic Energy Act of 1962 prohibits private control of nuclear power generation.
However, fossil fuels in the form of coal still make up 75% of India's energy supply. The same can be said about China.
Minister Ramokgopa’s efforts of working on a pricing framework are welcome.
They will, as all else, be circumscribed by our poor fiscal and monetary frameworks that undermine industrialisation, competitiveness, and elevate the cost of living and doing business.
*The views expressed here do not necessarily represent those of Independent Media or IOL.
**Redge Nkosi is an executive director and head of research for energy, banking and macroeconomic policy at the Centre for Alternative Political and Economic Thought.
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