We are three weeks into a new fiscal year, and while politics, practicalities and policy madness fly about the fiscus and VAT, other things are new and interesting.
The VAT rate, while important, has been far too all-consuming (not helped by parts of the media overreporting the political flights of unworkable fancy on how to square the circle).
The most interesting new kid on the block, from the start of this month, is the department of electricity & energy. While we had a ministry of electricity & energy since the election last year, and a minister in the presidency for electricity for 18 months before that (slowly sucking powers and responsibility away from the department of mineral resources & energy), the new consolidated department has only just come into being.
The simplistic view put out there by government is that mineral resources & energy is just being split into two, with resources shared between ministers Kgosientsho Ramokgopa and Gwede Mantashe since the election now segmented, and that the new department of electricity & energy will just keep doing what needs to be done on electricity and energy issues.
But what is that exactly? It is a surprisingly hard thing to understand, and it sounds almost silly to ask. What exactly is government’s policy on energy and electricity that will guide and instruct the department, and what is the work it must do to drive forward policymaking and implementation in this area?
There is a severe lack of set piece speechmaking and an aversion to white papers from government and cabinet ministers. When was the last time a minister or the president gave a serious, long speech on any single issue in front of a broad group of stakeholders and social partners, tying together all the strands of complexity into a single whole? On electricity it was the announcement of the Energy Action Plan by the president in mid-2022.
Yet this was not followed up with a serious, weighty document tying all elements of the complex nature of electricity reform together. We can piece them together, for sure, from National Energy Crisis Committee (Necom) publications, budget vote speeches and the state of the nation addresses, the Medium Term Development Plan (MTDP), press conferences, Q&As in parliament, parliamentary committee appearances and draft Integrated Resource Plans. The list goes on. But we have to play “solve the puzzle”.
The MTDP is clear on policy intent — for instance the need for a competitive market among generators is firmly stated. However, the plan is too high level and does not get into the weeds and complexity of policy choice between competing and conflicting elements (such as that historic Eskom generation plants will be shielded from competition, or how distribution level competition works between private self-consumption generation and private feed-in generation, and public for municipalities, which in turn creates financial sustainability problems. And so the piece of string can be stretched).
A key challenge of the electricity reform space is the sheer complexity, and that there are so many pieces of string to pull on, which leads to endless dependency after dependency being exposed — sometimes in conflict with each other.
The year 2022 is now a long way behind us, and it would be good to see the new department launch itself in the world with self-confidence and show it understands the complexity of its job.
The previous administration’s reputation for electricity and energy policymaking is still sullied by the problematic history of government blocking and frustrating the policy directions that are now settled and encapsulated in the MTDP. It is surely right for the new department to seek to break the chains and establish itself and its reputation anew.
The need for an electricity minister in the presidency in the previous administration was precisely because the then department of mineral resources & energy continually and disastrously dropped the ball.
The logistics reform momentum now under way shows what happens when you combine a minister with a keen eye for unblocking through the deployment of political capital, and a detailed plan against which to do so. The Freight Logistics Roadmap is huge and detailed, and ties all the elements of complexity about that area neatly together — based on a sound foundation of diagnosis and following the evidence to the necessary conclusions.
Such a document does not exist for electricity, and that is a problem. The Eskom Roadmap is out of date and never went into wider detail — even on the narrow question of the unbundling of Eskom it failed to pull all the necessary strings, including on distribution unbundling and tying it into emerging trading services reforms, but also on the complexity of unpicking the unnecessary, lazy Lazard structure put in place in the National Transmission Company of SA.
The new department needs to update the Eskom road map as a key signal of the minister’s seriousness on the unbundling question and wider reform.
The department’s credibility will ultimately come from showing a clear scheme of work that ties in Necom, the National Transmission Company, Eskom and others and that shows an appreciation of the complexity and interwoven nature of what needs to be done to ensure energy security of a least cost and decarbonising electricity system. The MTDP is too high level, and detail is now needed. We cannot just rely on listening to speeches and playing the puzzle game.
It is rare in government or any sphere to get a blank sheet of paper. This is a great opportunity that should be seized.
• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.
This article first appeared in Business Day.
