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January 31st, 2008 My dear friends and fellow South Africans, The announcement that the government is to introduce electricity rationing with a fortnight of rolling blackouts to millions of homes and businesses is indeed a "national emergency". Amid warnings that the electricity shortage will go on for years, the country's deepening power crisis forced the world's largest gold and platinum mining companies to shut down operations last week. The government, correctly in my view, has blamed the power shortages on increased demand caused by years of economic growth and the provision of electricity to townships that were not connected in the apartheid era. There cannot be many middle-income economies in the world which has had to ramp up its electricity supply in such a short period as South Africa. The government's candour in admitting that it had failed to heed a warning from Eskom ten years ago that without new power stations it might not be able to meet demand by 2007 is commendable. To be fair, the then new government a decade ago was grappling with an array of what must have seemed more important public policy interventions. It is understandable, if not excusable, that the policymakers' radar missed the early warning. All governments hate to admit major policy failures and the speedy acknowledgement of this crisis is a first step in rectifying the problem. The IFP had, in fact, warned last year of the pending disaster. Our spokesperson for minerals and energy Eric Lucas warned in last year's budget vote (31 May 2007) that the electricity outages and burgeoning demand would inhibit growth and foreign direct investment. This is why I was concerned that Public Enterprises Minister Alec Erwin said on Tuesday that the country's economy would continue to grow at the expected rate of 4 to 5 percent a year until 2010 if the demand for electricity could be reduced. There is a problem with this: economic growth and investment are intimately tied up with market sentiment in the global economy. If the perception takes hold that South Africa cannot meet its energy needs, foreign investors, already scarce, may shy away. At home, entrepreneurial dynamism will also take a hit. Small and medium size businesses form the bedrock of the South African economy. How can a new family bakery, for example, cope if the electricity keeps being turned off when the bread rolls are in the oven? The other problem is that Mr Erwin effectively places a glass ceiling of 5% on South Africa's economic growth. In truth, 5% is not fast enough for an emerging market. And, on top of this, we are hosting the World Cup in 2010 which has been billed as a golden opportunity for economic growth and further structural development. The spectre of stadium lights going out during the tournament is too dreadful for words. So what is to be done? 1. Some of the 2006/2007 budget surplus must be used to finance Eskom's capital expansion programme. IFP finance spokesperson Narend Singh recently revealed that the Finance Minister Trevor Manuel had told him at a briefing last year that he did not envisage the need to do so. Mr Manuel must immediately rectify this and inject finance into Eskom. 2. End Eskom's monopoly. Whilst the IFP is sensitive to the argument that Eskom is a 'natural monopoly' with 'economies of scale', we believe that the barriers which prevent independent producers to generate electricity and compete against Eskom must be removed. Sceptics will point to the California electricity crisis in 2001 and 2002 which resulted from the manipulation of a partially deregulated energy system by energy companies such as Enron and Reliant Energy. Energy price regulation forced suppliers to ration their electricity supply rather than expand production. This scarcity created opportunities for market manipulation by energy speculators. We can learn from California's experience: deregulation should not be half-baked. Under the constitutional obligation to provide electricity to all, legislation here must be crafted to prevent market speculation and to ensure that companies are prevented from 'skim-creaming' the most lucrative customers. 3. Unleash the 'know-how of the private sector'. The IFP believes if Eskom had been able to recruit aggressively from the most talented ranks of the private sector, the energy crisis could have been avoided. Eskom's human resources must be beefed up with skilled people who can make crisp economic forecasts as well as provide technical expertise. 4. We must diversify our energy sources. South Africa must expand its energy mix and end its reliance on coal in order to meet our international obligation to cut carbon emissions. The IFP believes that the political and environmental argument on nuclear power can and, in all probability, will have to be won. It appears, for instance, that Britain is moving in this direction. The development of the Pebble Bed Modular Reactor (PBMR) should be given the green light. A positive spin-off would be investment in research and development. The question of the long-term safety and storage problems posed by nuclear wastes, in particular, must be resolved. In France - the land of technological wonders like Concorde and the TGV train - the country's main electricity generation and distribution supplier, EDF, produces 79% of its power, making France the world's leader in production of nuclear power. France is the world's largest net exporter of electric power, exporting 18% of its total production to Italy, Britain, and Germany, and its electricity cost is among the lowest in Europe. In a poll held last year, 88 percent of the French population believed that reducing the greenhouse effect was a good reason to continue using nuclear power. 5. South Africa's leaders need to lead the way in changing behavioural patterns. We need to be told authoritatively how important it is to save electricity and to begin car sharing to reduce carbon emissions. It is the little pieces of the puzzle that will eventually put together a holistically successful energy conservation strategy. As the IFP is the party of decentralisation, could decentralised energy be the future? This longer term project would involve a rethinking of the power system, so that individuals, families and communities could focus more on generating their own energy - with solar panels, with solar geysers, with wind turbines, with combined heat-and-energy boilers - and then have the opportunity to sell any surplus back to the central grid. There are considerable challenges here but there are entrepreneurial opportunities, too. Are solar panelling and geysers being incorporated into the architectural plans for new public works buildings? Not yet. Education awareness is the key to energy conservation. Like many aspects of our nation's life, awareness begins in the schools. Media tools such as Al Gore's Inconvenient Truth could be used to educate young people about the importance of reducing electricity consumption by turning off appliances in the standby mode - even turning off the television at the mains or adjusting a refrigerator setting reduces consumption. Yours sincerely, Prince Mangosuthu Buthelezi MP
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