Should Africa rethink its electricity supply approach?

The electricity supply industry in Africa is at a crossroads, particularly with the challenges faced by major utility player Eskom in South Africa. Penny Herbst, Director Strategy for Africa GreenCo and a former long-serving employee of Eskom, shared her insights on the current state of the industry in a recent interview on CNBC Africa. Herbst believes that Eskom, often viewed as 'too big to fail,' is salvageable, but it requires a holistic approach to address the underlying issues plaguing the entire electricity supply industry. She emphasized that Eskom is just the tip of the iceberg, and significant reforms are needed below the surface to ensure long-term sustainability. Herbst pointed out that the industry encompasses various stakeholders, including consumers, regulators, and financiers, and tackling Eskom's challenges requires a broader perspective. The conversation delved into the government's proposed restructuring plan for Eskom and the timeline for implementing critical reforms. Herbst cautioned against rushing into restructuring without addressing immediate issues, such as the operational challenges at aging power stations like Kusile and Medupi. She recommended ringfencing these facilities and appointing specialized teams to focus on their turnaround. Herbst also highlighted the importance of maintaining the performance of well-functioning power stations while implementing targeted interventions at struggling units to ensure the continuity of electricity supply. Regarding the timeline for restructuring, she suggested a cautious approach, estimating a two to three-year timeframe to address operational inefficiencies before embarking on broader structural changes. Pricing was another key area of discussion, with Herbst underscoring the need to reevaluate the tariff methodology in light of significant shifts in currency exchange rates and government support for Eskom in the past. She emphasized the importance of setting aside funds for future infrastructure investments and recognizing the changing cost dynamics in the electricity supply industry. Herbst's insights shed light on the complexity of Eskom's challenges and the broader implications for the electricity supply sector in Africa. As stakeholders grapple with the path forward, the focus on sustainable solutions and long-term planning will be crucial to ensure a reliable and affordable electricity supply for the continent.