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Open-Ed
- South Africa’s Mineral Resources and Energy Minister, Mr Gwede Mantashe, along with representatives from the IPP office, briefed Parliament’s portfolio committee on mineral resources and energy yesterday.
After having a go at dismissed Eskom GCE, Andre de Ruyer, who without mentioning his name, effectively accused Mantashe or other high level government officials of corruption during a sweeping interview broadcast on national television on Tueday evening, Mantashe pushed on with his usual narative regarding the country’s energy crisis. Many argue that Mantashe must be held accountable for the energy crisis by failing to procure and connect much needed new energy generation to the national grid. Read more
On solving the energy crisis, Mantashe said that there are six power stations with an energy availability factor of less than 50%. “In that process, we lose above 7 000MW. So if we want to deal with loadshedding, there must be an emphasis on optimising the power stations that are available and connected to the grid,” he said. Whilst not naming the six power stations, Mantashe also failed to inform parliament that Eskom’s has on average around 16000MW on unplanned breakdowns and about 3500MW on planned maintenance at any given time. Mantashe did not elaborate how he was going to get an additional 50% out of the ‘six power stations’ that are under breakdown.
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He added that renewable energy lobbyists claimed that additional renewable energy would end loadshedding. He said that this is a myth because new wind and solar projects take 12 to 18 months or more to construct. If he knows this then why has he delayed the procurement of wind and solar capacity since taking office nearly four years ago?
The truth is, had Mantashe fulfilled his mandate properly, the country would not be experiencing severe load-shedding because 5000MW of new generation capacity would be feeding electrons into the grid. Read more
“If you want to deal with loadshedding, then it is not renewable energy that can do it,” said Mantashe. “The electricity minister will focus on Eskom accelerating optimal performance; accelerate the procurement of emergency energy; ensure that SA is able to import electricity from neighbouring countries, and put a greater focus on acquiring skills for Eskom,” added Mantashe.
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Mantashe also commented on the viability of the Karpowership deal coming online. He said that they (Karpowership) had not yet gained environmental approval and this was a “a different department’s responsibility”. He said that the deal was approved because we thought they could help. “People said they are expensive, but at R2.70 a unit, there is nothing expensive about that. If you reduce the length of the contract to 10 years, then it is equal to R1,34 a unit and there is nothing expensive about that.” In reality, if you halve the power purchase agreement (PPA) period, the price per kilowatt hour goes up considerably.
All roads point to Mantashe for causing extended delays in procureing new generation capacity
Since the Independent Power Procurement Office (IPPO) was seconded to the Central Energy Fund in 2017 and then purged in 2019 to fall under the Department of Mineral Resources and Energy (DMRE), the ability of the country to procure new generation capacity has declined dramatically.
The Department of Mineral Resources and Energy (DMRE) along with the Independent Power Producer Office (IPPO) is responsible for energy procurement in the country.
Mr Gwede Mantashe was appointed Minister of Mineral and Energy Resources in May 2019. That same year Mantashe was credited for promulgating the country’s Integrated Resource Plan (IRP) which seeks to procure 35348MW of a mix of generation technologies by 2030. The following year he gazetted a Sector 34 determination to procure 11813MW of power by 2022.
Since Mantashe’s appointment, three energy procurement programmes have been implemented namely; the Risk Mitigation Independent Power Producer Programme (RMIPPPP) which seeks to procure 2000MW of new generation capacity (launched in September 2020), and the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Window 5 which seeks to procure 2500MW of new generation wind and solar capacity (launched in April 2021). A third procurement programme, REIPPPP Bid Window 6 which seeks to procure 2600MW of solar and wind capacity, was launched in April this year. Unaware that IPPs were gobbling up feed-in capacity for private PPAs, in early September, Mantashe upped the capacity of Bid Window 6 to 4200MW (1000MW for solar PV tech and 3200MW for wind). Read more
In total, 8700MW is to be procured under the three programmes yet to date only 150MW ( 3 x 50MW projects) and two 140MW wind projects have reached financial close and are expected to feed electrons into the grid at the end of Q4 2023.
The 13 projects announced by Mantashe bring a total of 19 of 25 projects to the legal close stage. This news follows Red Rocket and EDF signing Bid Window 5 legal close on three wind projects each in the last two months. EDF has reached a financial close on its three wind projects while Red Rocket is still in the financial close process.
Unbalance, delayed energy procurement outcomes with glaring red alerts
REIPPPP Bid Windows 1 to 4 had largely uncontested and very balanced outcomes. The projects that were awarded preferred bidders status in these rounds achieved financial close within three to four months largely because projects were chosen that were shovel ready or close to shovel ready (shovel ready meaning ready to be constructed).
Related news: SAWEA on REIPPPP: Delays, Inconsistencies and Halted Bidding Windows
The results of REIPPPP Bid Window 5 under the current IPPO reveal a very unbalance outcome and projects are struggling to reach financial close. Taking a closure look at the outcome of Bid Window 5 there are several standout red alerts:
- One international IPP, Mainstream Renewable Energy, won 12 of the 25 projects
- 21 of the 25 preferred bidders have the same BBBEE partner in H1 Holdings – Mainstream Renewable Power (12 projects), Scatec (3 projects) and EDF (3 projects) and local IPP Red Rocket (3 projects). The underlying principle of B-BBEE is to spread wealth sustainably and as far as possible, to the previously disadvantaged.
- 21 of the 25 projects were won by foreign-owned IPPs
- The tariffs bided were unsustainably low and not bankable. The average weighted price bid for solar comes in at (R) 42.9c kW/h while the average bid for wind is (R) 49.5c kW/h. Industry experts claim that the winning tariffs are too low to be realistic. Read more
- The majority of the projects who won preferred bidder status were not shovel-ready and had outstanding development works activities including CEL, EIA and other permitting.
- The criteria set for local content are unrealistic and cannot be implemented.
Unbalance outcomes extend to RMIPPPP
The lack of capacity at the DMRE extends to the Risk Mitigation IPP Procurement Programme (RMIPPPP) where there are key contractual issues, and the majority of projects are not bankable and/or EIA-approved. Simply put the tender programme was badly managed from the outset. There is also no coincidence then that the only three projects totalling 150MW that achieved financial close in the 2000MW RMIPPPP have the same BBBEE partner that won 21 projects in REIPPPP Bid window 5.
About Gwede Mantashe
Samson Gwede Mantashe, popularly known as Gwede Mantashe is a communist, South African politician, and trade unionist, who as of 18 December 2017, serves as the National Chairperson of the African National Congress. He is also a former chairperson of the South African Communist Party and Secretary General of the ANC.
He studied at the University of South Africa in 1997 and completed a B.Com Honours degree in 2002. He also acquired a master’s degree from the University of Witwatersrand in 2008. He completed his MBA through MANCOSA in 2021
He joined the migratory labour force to eke out a living in the mining industry. Beginning his mining experience at Western Deep Levels mine in 1975 as a Recreation Officer and, in the same year, moved to Prieska Copper Mines where he was Welfare Officer until 1982.
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In 1982, Mantashe moved to Matla Colliery where he co-founded and became the Witbank branch chairperson of the National Union of Mineworkers (NUM), a position he held until 1984. He was then elected NUM Regional Secretary in 1985. In recognition of his skills, Mantashe became the NUM’s National Organiser from 1988 to 1993 and its Regional Coordinator between 1993 and 1994. He was elected Secretary-General of the African National Congress at the party’s 52nd national conference in 2007.
Mantashe and his family are implicated in a string of corruption scandals. Mantashe’s daughter received R1 million in illicit Eskom money. His wife’s business received an R639 million catering contract for the still incomplete Kusile coal power plant project that has been riddled with corruption and cost overruns. His foundation is also embroiled in corruption scandals over millions in irregular payments.
In the country’s Commission of Inquiry into Allegations of State Capture, it was revealed that Mantashe received security upgrades to his three homes from the now-defunct company, Bosasa. The commission’s chair, Justice Raymond Zondo, said there was no evidence of contracts being awarded due to Mantashe’s direct interference, but there were “reasonable grounds for suspecting that Mr Mantashe accepted or agreed to accept gratification” from a company (Bosasa) that wanted business from the state and that further investigations had a reasonable prospect of making prima facie findings of corruption against Mantashe. Mantashe of course denies all charges. Read more
It is also important to recall that during Zuma’s ten-year presidency, Mantashe was a key figure in the project to shield him from accountability. As secretary-general of the ANC, he instructed members of Parliament to always side with Zuma or face discipline. As such, he was a key enabler of corruption during the Zuma years and remains part of the RET faction.
South Africa is in a spiralling energy crisis, rotational load shedding is getting worse and the cost to the economy is a massive R950 million a day.
Judging by his track record and the ongoing malalignment with Eskom and his own party, if Gwede Mantashe stays on as energy minister, it is clear the energy crisis in South Africa is only going to get worse.
Author: Bryan Groenendaal
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