Is The End Of Eskom Nigh?

The recent announcement that the private sector may generate up to 100MW of power has huge implications for South African businesses and Eskom.

- Simon Brown

The announcement by President Cyril Ramaphosa that businesses will be allowed to generate up to 100MW of power without a generation license is huge and has real implications for investors. This announcement needs to be gazetted before we know exactly what the terms and conditions are. Assuming they’re not onerous, it is a real game changer, albeit an overused cliché.

Back in May, Goldfields announced they had permission to build a 40MW solar plant at their South Deep mine at a cost of around R660m. This is not cheap, but is ensures that they have power and it saves them money, due to Eskom’s high electricity tariffs. Goldfields estimated it would save them some R120m a year. So, the pay-off period is under five years (assuming single-digit Eskom tariff increases over the five years). The remaining issue is that even 40MW will only supply around 20% of the mine’s electricity needs every year. So, if the company increases it to 100MW it could save around R300m a year.