South Africa loses R700 million a day for every stage of Eskom's rolling blackouts. Given these catastrophic economic challenges created by the collapse of electricity infrastructure, an urgent alternative energy supply is needed to stabilise the grid.
The alternative that will achieve both electricity stability and markedly decrease carbon emissions is a natural gas condensate.
Approximately 3.5 million tonnes of liquified natural gas from Mozambique could cover the generation deficit experienced by Eskom, highlighting the important contribution that gas could have in dramatically stabilising South Africa’s electricity grid. Since gas is widely identified as imperative for the transition towards a carbon-neutral future, the country can benefit greatly from recent gas discoveries.
Implications for the gas industry
Major gas discoveries made by Total in the Outeniqua Basin and Renergen in the Free State have catapulted South Africa as a major player in the global gas arena.Allowing the country to add gas to Eskom's crumbing grid alongside renewable energy will advance South Africa's path towards prosperity. Enter, however, government's Gas Amendment Bill.
The Mineral Resource and Energy Committee has held a public hearing for public input on the Bill. Two of the Bill's aims will have major implications for the gas industry: Seeking to promote Broad-Based Black Economic Empowerment (BBBEE) and enhance the national regulatory framework in the gas industry.
Given that the gas industry is virtually unchartered territory for South Africa and the potential economic growth it would induce, it is imperative that public policy reinforce reform. This as opposed to pursuing the ideological objectives of the ruling party which has plunged the country into an energy crisis.
With Eskom having to comply with damaging equity frameworks and stringent regulatory requirements is a prime example of why the Gas Amendment Bill threatens prosperity.
Deep patronage networks have engulfed Eskom in corruption and has run the state-owned enterprise to the brink of collapse. Undoubtedly, this is partly a consequence of BBBEE which only benefits an elite few under the façade of transformation.
For example, while Eskom operates on generators, the diesel used for these generators are procured from an individual who acquires the diesel and resells it at a premium to the power utility. The reason this is possible is because the manufacturer of the diesel cannot do business with Eskom directly, because of irrational and ideological BBBEE requirements.
A patronage quota
Allowing the BBBEE rot to grow on the new gas industry will ruin any prospect of prosperity stemming from the sector. BBBEE is simply a patronage quota; an insult to the working class that tramples on industrial growth and progress.
Government uses BBBEE as a weapon to deepen its corrupt networks to advance unhealthy personal relationships at the expense of innovation and efficiency.
Government's insistence on heavily regulating the industry will add an additional layer of complexity to the growth of healthy competition within the South African gas sector. The Bill goes so far as to scrap the provision in the original Gas Act that prohibited government from selling any shares or assets without a transparent bidding process, and at the same time gives government the ability to grant commercial monopolies where it deems necessary. This will severely impede sellers and distributors of gas.
Ironically, Energy Minister Gwede Mantashe wants to advance transformation in an effort to build an inclusive gas sector with the aim of benefiting the majority of South Africans. Yet his Bill undercuts the ability of smaller gas companies to compete with larger and more established role-players. Mantashe's Bill chokes the prospect of healthy competition and heavily favours state-backed monopolies.
It's time to end the state's stranglehold on the economy
The electricity grid is the lifeblood of the economy. It is estimated that over a million jobs were lost due to Eskom's rolling blackouts.
Innovation cannot happen unless basic needs are met, which means the economy is regressing while dependent on the collapsing state power utility. It is time to end the state’s stranglehold on the economy. Allowing the Gas Amendment Bill to be enacted will be detrimental to innovation.
Consequently, some turbines can operate partially or fully on hydrogen gas. Hydrogen is a carbon-free energy carrier and holds myriad innovative benefits for South Africa. Thus, it has the potential to transform public and private transport if there is widespread commercialisation of the gas industry.
However, this innovation can only occur with competitive gas value chains that are left to prosper without unnecessary government meddling.
Notwithstanding the fact that Mantashe's utterances on renewables are laughable, South Africa needs a strong energy mix, with renewables playing a notable role in relieving the crumbling power grid from the Eskom monopoly. Gas, renewables, and, in part, coal, need to assist the country's energy transition to a cleaner and sustainable energy supply.
The Gas Amendment Bill advances the ruling party's cause to promote the National Democratic Revolution by establishing a patronage network through BBBEE and asserting the State's stranglehold over a key industry.
Aside from expropriation without compensation, this Bill implicitly attempts to expropriate gas in a subtle way by giving the government unfettered access to the industry. Gas is too important to leave to politicians.
In order to reduce costs in the gas value chain and accelerate development, the government should cancel its plans to go ahead with the Bill.
This article was first published on BBrief on 7 December 2021.