Ramaphosa flicks a switch

Perhaps the penny has finally dropped. A long-standing criticism of President Cyril Ramaphosa is that he seems to be unaware that he is in charge, or at least has no inclination to make that fact clear to his ministers. Something changed on Thursday, with the announcement of a much-needed piece of reform on energy policy, that companies will be able to generate and even sell-on electricity of up to 100MW without a licence.

It is a major development. Not only does it signal the unblocking of the economic reform process, but it is also the start of the real liberalisation of SA’s energy market. It will effectively mark the end of the Eskom monopoly and introduce competition into the sector for the first time.

It is a big and major reform and Ramaphosa must be congratulated. It did not, however, come easy.

Questions about the energy private sector companies should be allowed to generate, for their own use and to provide to others, without asking the regulator for permission would not be expected to exercise minds beyond boardrooms. Yet it was just three weeks ago that the department of mineral resources & energy under Gwede Mantashe was spinning yarns about widespread public opposition to a reform measure that would “cause chaos”.

In May, Mantashe would have SA believe that 10,000 of its citizens had expressed an opinion, via a survey, on the licensing threshold for self-generation of electricity, and that this was reason enough for setting it at 10MW. Anything above that would need a licence from the National Energy Regulator of SA (Nersa), a costly and time-consuming process.

Business groups and André de Ruyter, the CEO of Eskom, which one might expect would have led the chorus against reform, since it will eat away at its monopoly, have argued for the threshold to be set at 50MW.

Perhaps driven by internal ANC politics, Ramaphosa has appeared to be paralysed in the face of the defiance of a subordinate who is an influential ally in the fractured party he leads. In that context, Ramaphosa’s move to increase the limit to 100MW, double what most of business had been lobbying for, has been widely welcomed.

Business Unity SA said, based on a 50MW limit, the reform has the potential to create more than 16,000 direct jobs, and the potential will be “significantly higher” with 100MW.

The announcement in itself won’t be any kind of silver bullet. It is going to be some time, perhaps a couple of years, before it translates into new energy capacity. Ramaphosa said the necessary amendment to regulations will come in the next 60 days or sooner, and after that companies will have to apply for projects and get them off the ground.

The announcement came on the same day that Business Day reported that a climate change commission appointed by the president has recommended a change to SA’s climate targets, which in turn will entail revisiting its long-term energy plans.

About two years after finance minister Tito Mboweni published his “Economic transformation, inclusive growth, and competitiveness” paper, there are signs of progress. It was more than a year ago that the Treasury announced the creation of a policy unit, headed by deputy minister David Masondo, to push reforms. Operation Vulindlela, coming in the wake of SA losing its last investment-grade status, was not exactly greeted with much optimism, and we feared Masondo was being set up to fail.

Ramaphosa now has to act to ensure that for South Africans, it does not turn out that hope is what kills. The first thing is to make sure the necessary amendments are published on time.

While it is disappointing that it has taken this long, the announcement is a much needed boost to confidence. Like Business Unity SA CEO Cas Coovadia said, we hope it is “the beginning of a trend where the president will act decisively to unblock numerous blockages in delivery”.

SA needed him to do that three years ago already.

IT IS A BIG AND MAJOR REFORM AND HE MUST BE CONGRATULATED. HOWEVER, IT DID NOT COME EASY