Budget 2020 Eskom

Finance Minister Tito Mboweni / Image via Twitter: Parliament of RSA
@ParliamentofRSA

Budget 2020: Tito Mboweni backs Eskom alternative

It’s a greenlight from the ‘money man’ – municipalities will soon be able to avoid dealing with Eskom.

Budget 2020 Eskom

Finance Minister Tito Mboweni / Image via Twitter: Parliament of RSA
@ParliamentofRSA

During his 2020 Budget Speech on Wednesday, Finance Minister Tito Mboweni confirmed that municipalities would soon be able to purchase electricity directly from Independent Power Producers (IPP), thereby circumventing Eskom’s problematic power supply monopoly.

Reaffirming government’s position on the current energy crisis facing South Africa and reiterating pertinent points raised during President Cyril Ramaphosa’s State of the Nation Address (SONA), Mboweni noted that Eskom’s numerous failures stood directly in the way of economic growth. The finance minister added that securing a stable and sustainable power supply remained government’s “number one priority”.

Eskom hurting economic growth in South Africa

With his customary Aloe ferox plant by his side – said to represent the resilient nature of South Africa’s economy – minister Mboweni explained that while Eskom would receive further financial assistance from government, estimated at R60 billion over the next few years, other power alternatives were actively being investigated. Speaking on South Africa’s economic forecast, Mboweni said:

“Persistent electricity problems will, however, hold back growth. Government will do ‘whatever it takes’ to ensure a stable electricity supply. As I said, it is our number one task.”

In line with provisions noted in South Africa’s Integrated Resource Plan of 2019, the finance minister explained that the addition of renewables and Independent Power Producers to the mix would alleviate the immense strain currently crippling Eskom. Mboweni added that emergency maintenance procedures, while disruptive as a result of short-term capacity deficits, were vital in ensuring Eskom’s long-term sustainability model.

Dealing direct with Independent Power Producers

To help lighten the burden of supply, Mboweni announced his support for independent purchase agreements, saying:

“It will shortly be possible for municipalities in financially good standing to purchase electricity from independent power producers.”

During his SONA address, Ramaphosa noted that independent power producers and associated procurement arrangements would be rolled out over the next three to 12 months.

The inclusion – and sudden support from government – of the controversial IPP scheme has been well-received by municipalities which have advocated for an alternative to Eskom. However, the decision to enable IPPs has also been met with criticism, mainly from the Economic Freedom Fighters (EFF) and trade unions which believe that job losses will result from Eskom’s diminished monopoly of the energy sector.

Western Cape Premier Alan Winde has been especially supportive of the proposed IPP plan and has noted the province’s readiness to capitalise on renewable energy sources, saying:

“Many of these are projects which we have been talking about for some time in South Africa and it is now time to move from talk to action.”

The City of Cape Town has confirmed that it has already started preparing its own Integrated Resource Plan (IRP) which will rely heavily on “clean” energy IPPs.