Saturday, May 21, 2022

Power problems in SADC shows regional integration still lacking

Every two years, Presidents of Botswana and South African meet for the Bi-National Commission that tracks cooperation between the two trading partners. On paper, this initiative was a step in the right direction, while in reality; South Africa is still the senior partner as seen by trade imbalance between the two trading partners.

One just has to look at trade statistics to see that Botswana is a mere junior partner in this relationship. Trade is skewed towards the giant neighbour. There are many South African companies operating and dominating commercial spaces in banking, insurance, mining, travel and tourism and in the end Botswana consumer helps South Africa GDP grow.

As they say, we import almost everything from South Africa that even when Eskom has supply difficulties; it includes Botswana in the schedule because Pretoria put Gaborone in the mess it is in the first place.

It is well documented that Botswana cannot compete with South Africa, but because of large natural resources second to none in the continent, the country can use this comparative advantage to stake its claim in the trade relationship. Rather any attempt does not receive much support from Pretoria. Besides, Botswana is a junior partner.

An example is the Mmamabula Energy Project (MEP), which was Botswana’s attempt to narrow the trade imbalance as it was going to export 75 percent of power from the plant that was initially 2400 MW, but was scaled down because of lack of buy-in from power utilities in the region. The project located in the central part of the country was aimed at exploiting the country’s bragged about 200 billion tones in coal reservesÔÇöthat remains largely untapped in the country.
MEP, which was sponsored by CIC Energy, a Canadian company, actually never took off. The former Chief Operating Officer (Projects) and now Managing Director at Norconsult Africa, Tore Horvei has shed light that actually: ‘Mmamabula failed because of political reasons’.

Even South Africa’s intellectuals see this. Anton Eberhard, a Professor at the University of Cape Town’s Graduate School of Business and a member of the National Planning Commission wrote in BusinessDay that should have Eskom signed Power Purchase Agreement with CIC Energy for power offtake, it could have alleviated power difficulties that is hurting South Africa’s economy.

There were power games. South Africa had a target date to gazette their Integrated Resource Plan (IRP) by September 2010. This would lay out the country’s strategy for meeting new energy needs from 2013 onward, assumed to include new government-owned facilities and contracts with private suppliers such as CIC Energy.

South Africa said they could not commit to any Power Purchasing Agreement (PPA) with CIC before the IRP was approved. The delay would affect Botswana, which needed a portion of the plant’s output to meet projected demand. The IRP was eventually completed in May 2011. It did not include any window for purchase of power from Mmamabula before 2019, and then the amounts purchased would be less than 1200 MW. CIC Energy was forced to put the project on hold after investing over C$100 million. (http://en.wikipedia.org)

Eberhard argues that Mmamabula coal project (1,200MW) offered Eskom a rand-denominated long-term contract for 72c/kWh, with below-inflation escalation clauses of which about $100m of private risk equity had been spent developing the project. Everything was ready.

By then a Chinese engineering contractor had been signed. Finance was in place. If Eskom had signed a power purchase agreement, the project would now be delivering power. Instead, Eberhard says once again, Eskom argued it could do better and says he does not know that Medupi and Kusile will cost very much more than either Kudu or Mmamabula.

Everyone agrees that Mmamabula would have not solved the regional power problems, but atleast it could narrowed the trade gap between Botswana and South Africa. Equally, it could have lessened the impact of power cuts in the region.

This was a big opportunity at giving direction to the faltering regional integration. It is only now that South Africa admits it is looking at short term energy solutions from projects that could provide makeshift energy solutions in the region.

The two economies are facing power crisis as they currently can not meet energy requirements respectively. An outsider look to these problems, one would think it is just a honest problem that is beyond Eskom and Botswana Power Corporation. But to critics it something that could have been managed had our leaders been pro-active and sincere to how they deal with the problem.

Morupule B as it stands is far from being stable and Botswana Power Corporation is still reliant on Eskom.

And the situation is made worse that in a typical behaviour of those in charge, they are denying there is power crisis. For example, Chief Executive Officer of Eskom, Tshediso Matona blames the media for creating a perception that there is electricity supply crisis in their reporting on the problemt. Whether there is a denial of the existence of crisis, but to consumers, there is a power problems in the region.

Botswana, which relies heavily on imports has therefore been caught in the Eskom struggles and at a time when Morupule B Power Project is failing to stabilise. The consumer feels the brunt and at times has to pay the cost of failure.

Had it not been poor planning by Botswana government to build capacity when it still had money, the economy could not be suffering as it is now. Power plays a very crucial role as production input.

Interruptions in electricity supplies therefore means impact on production of goods and services and can affect the country’s competitiveness especially at a time when economies are smarting global economic crunch.

South Africa and Botswana is where it is because of corruption, lack of proper planning and South Africa’s Big Brother mentality in the region. There were opportunities created to increase power capacity in the region when a precious chance was wasted.

The situation we find ourselves could have been avoided or minimised if projects like Mmamabula energy projects were supported. Next time when President Zuma and Khama meet in 2016, they should own up to failures to deliver power to the people.

Instead of Zuma blaming apartheid, he should accept that the South Africa’s Big Brother mentality is costing his country dearly. His argument that they inherited Eskom problems from aphartheid regime does not help the situation. No matter Nigeria is now the biggest economy in Africa.

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