NEWS & ANALYSIS

Mantashe’s fishy powership deal

John Steenhuisen says the deal has BEE-enabled corruption written all over it

STRAIGHT TALK

29 April 2021

Like Zuma’s dodgy nuclear deal, Energy Minister Gwede Mantashe’s powership deal is deeply suspect and frankly reeks of corruption.

It locks South Africa into a 20-year contract to purchase expensive, dirty power when the cost of clean renewable energy is falling every year. The Council for Scientific and Industrial Research (CSIR) has estimated this deal will cost South Africa R218 billion over 20 years. That is a truly vast commitment.

A powership is a ship on which a power plant is installed. They anchor just offshore to provide ship-to-shore electricity to countries unable to generate enough of their own. These are generally failed or failing states such as Ghana, Mozambique, Sierra Leone, Gambia, Senegal, Sudan, Beirut, Iraq and Pakistan which are currently using powerships on contracts of two to five years.

Under Mantashe’s deal we’ll be paying R2.30 per kilowatt hour while Saudi Arabia has just signed a power purchase agreement for solar power at a record-low $0,0104 per kilowatt hour which is equivalent to 15c per kilowatt hour in South Africa.

Worse still, this price will most likely increase over time in real terms because the liquified natural gas we’ll be importing to fuel these ships is priced in dollars and linked to a carbon tax, both of which are likely to push the price up in South African Rands.

Consider how it will impact South Africa’s ability to compete globally and create jobs locally when we are paying high and rising prices for dirty power while other countries are paying low and falling prices for clean power.

There is no doubt that South Africa urgently needs to secure additional power supply. We face a 4000-megawatt (MW) shortfall over the next 5 years. Almost any solution will be preferably to load-shedding, which is estimated to cost our economy R1 billion per stage per day, amounting to a loss to SA of at least R59 billion in 2019.

Electricity from powerships will cost us about 30% less than that of our current emergency supply system, Eskom’s open-cycle gas turbines (OCGTs) which burn diesel. Mantashe is hanging is hat on this argument.

However, there are alternatives to powerships that are cheaper, cleaner, less risky and more job-creating.

Renewables provide a cheaper, cleaner solution that involves more fixed local investment. Energy experts say solar and wind power, in combination with battery storage could provide the same amount of power that Mantashe’s powership deal can provide, and with the same lead time.

Self-generation – allowing and incentivising businesses and households to generate electricity which can be fed into the grid – has the potential to add 3 400 megawatts of electricity supply within two years and create over 30 000 construction jobs, according to the CSIR. In Vietnam, self-generation produced 7,200MW of generation capacity from the private sector in just over a year.

Hydrogen fuel cell technology could start supplying the grid with significant additional power within just two years. It is estimated that the local market for “green hydrogen” could be R140 billion and the export market R1.5 trillion per year by 2040.

Unforgivably, the ANC government has dragged its heels on all of these.

Mantashe has sat on his hands for over a year refusing “to be rushed” into opening bid window 5 for renewable energy independent power producers (IPPs), without any reasonable explanation for the delay. In fact, bid window 5 for renewables was originally intended to be opened in 2016.

He has outlawed self-generation of more than 1MW and only recently and with some reluctance called for public comments on the raising of the threshold to 10MW, itself a ridiculous limit when there is no technical reason to cap it below 50MW.

Government has also been “extremely slow” to support the development of green hydrogen generation capabilities in South Africa.

Which begs the question: Why? Why has the ANC government been so reluctant to enable these decentralised energy solutions?

There is almost certainly a hidden agenda here. The best way to get to the truth is to follow the money. As Kgalema Motlanthe warned in 2007: “Almost every project is conceived because it offers opportunities for certain people to make money.”

With PPE looting, the ANC used a national crisis to milk the state.

In the case of power shortages, it seems the ANC has created a national crisis in order to milk the state. Mantashe’s powership deal has corruption written all over it, albeit corruption lent legal and moral authority by BEE legislation. So the broad-based poverty that will come from higher electricity prices and fewer jobs is packaged and sold to the nation as “transformation”, because it enriches a few ANC-connected cronies.

Having stalled long enough to create an emergency requirement for additional energy supply, Mantashe could then justify the need for a Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

Karpowership SA was the most successful bidder, winning two-thirds of the power generation capacity in the programme (1,220MW of the 1,845MW) with its bid to moor three Turkish powerships off the coast of South Africa, for 20 years.

Karpowership SA is 51% owned by Turkish Karadeniz Energy Group. Its 49% BEE partner in this deal, Powergroup SA, was only established in March 2020 and brings no skills or expertise to the table, having no prior experience in energy generation. Former special advisor to ex-State Security Ministers David Mahlobo and Bongani Bongo (themselves both deeply implicated in state capture and corruption), Thabo George Mokoena, is reportedly a 20% shareholder in Powergroup SA.

It is hard to conclude anything other than that, as with the rampant looting through PPE contracts, ANC-connected cadres are going to be raking in huge profits while adding absolutely no value. This is what happens when a political party captures the state through cadre deployment.

This is not black economic empowerment, it’s broad-based black economic impoverishment. The poorer people are, the larger the share of their meagre budgets that goes to food and electricity, both of which will see ever-inflating prices under this deal. So the 30 million South Africans living below the poverty line stand to lose the most, and 99.8% of them are black. There’s also the indirect harm to poor people as South Africa’s employment figures continue to fall as SA industries becomes less and less competitive.

Unsurprisingly, there has been the usual lack of transparency around the RMIPPPP process. The DA has submitted several Parliamentary Questions, including requesting that the records of the bid adjudication process be made public. Failing that, we will invoke the Promotion of Access to Information Act to request the details.

Yesterday, the ANC prevented the Portfolio Committee on Mineral Resources and Energy from performing basic oversight, by refusing an investigation into the processes followed and the scoring in the RMIPPPP. The DA will now approach the Standing Committee on Public Accounts (SCOPA) to obtain the information we seek.

The DA will use every mechanism available to us to get to the bottom of this fishy deal, and to fight for the lowest-cost, cleanest, least risky energy supply for South Africa. In the local government elections on 27 October 2021, a vote for the DA will be a vote for honest government that puts South Africa first. 

Warm regards,

John Steenhuisen