Gwede Mantashe has three face masks that he rotates in and out of the laundry each day when he braves the outside world to perform his duties as mineral resources & energy minister. At 65 next month, Mantashe falls into the vulnerable group that runs a higher risk of dying of Covid-19, should they contract the coronavirus. "I’m 65 and everybody above 60 who comes into contact with Covid — the next stop is the grave," he jokes.
Well, sort of. The virus is indeed among the handful of things that keeps Mantashe up at night. The others largely fall under the energy portion of his portfolio — a sector fraught with tension and contention that came under his charge a year ago, when it was merged with mineral resources.
As SA’s energy crisis deepens, there is deep concern that Mantashe is moving too slowly to unlock the growth potential of the sector — and in doing so, save SA’s economy.
As the pandemic sweeps the globe, and national lockdowns obliterate economies, a great many things will be forever changed. For a sector such as energy, this may not necessarily be for the worse, Mantashe says.
"Covid is changing the outlook, but it also has a silver lining that we must do things differently and quicker," he says.
If Mantashe is to be believed, it’s a hopeful prospect for those who have grown frustrated with the pace of reform in SA’s energy sector. The country has, after all, been facing a power supply crisis for over a decade now. And as Eskom flails and power demand continues to outstrip supply, business, more than ever before, is pressing the government to fix the energy sector. The pressure is mounting on Mantashe to perform.
Too big a task?
When it was announced in May last year that the mining and energy portfolios were to be merged under Mantashe, concerns arose that the portfolio would be too big for one man — especially one thought to be better versed in the rough and tumble of mining than the technically complex energy sector.
A year on, some still fear Mantashe is hopelessly out of his depth. Despite his promises to introduce more renewables to the grid and allow business to generate its own power, progress has been slow.
Mantashe’s first job was in the gold mines of Joburg. He later moved on to mining copper in Prieska, and then to coal, where he co-founded the Witbank branch of the National Union of Mineworkers before moving steadily up the ranks to become general secretary of the organisation — a position he vacated in 2006.
As a result, Mantashe is often described as a "mining guy" — but it’s a notion he seems to take umbrage at now.
"I regard myself as a professional first and foremost — and a self-made professional," he says. "I have two degrees in commerce. I have a degree in industrial sociology, I’m finishing my MBA … but my research for my master’s was in the decline of gold. If that makes me a mining guy, fine then."
Since the portfolios of mining and energy were merged, Mantashe says he has got it from all sides. "Everybody [in energy] says: ‘You love mining.’ Mining people say: ‘Since you took over energy you spend all your time in energy.’ When they all complain, I know that I’m doing something right. I spend all of my time in the portfolio. That’s the reality of the matter."
If he’s a professional first, Mantashe is also a skilled politician — an advantage in the mineral resources and energy sectors, where multiple interests are at play.
As Sahlulele Luzipo, chair of parliament’s mineral resources & energy portfolio committee, explains: "There are a lot of money-making possibilities in energy. There are a lot of competing interests."
Mantashe laughs. "Politics [is] not a challenge to me. I am a politician," he says. "It would be something else that is a challenge to me. If it is politics, where people contest and try to undercut one another, that is what I am subjected to every day. I understand that better."
But regardless of whether he’s a mining guy, a professional or a politician, the question remains: is the expanded portfolio simply too much for one minister to tackle?
Mantashe believes the merger makes perfect sense — it was, after all, a single portfolio until 2009. "It’s one value chain. That’s where you analyse the relevance or irrelevance of a portfolio," he says.
As he explains it: if you want coal, you mine it; then it goes on a conveyer belt to Eskom; and there it gets turned into electricity. "You take coal to Sasol, it’s then processed to oil or gas," he continues. "You drill gas in the ocean, it goes to PetroSA, it gets processed into a product that gets sold. It’s one portfolio."
Not everyone agrees.
Liziwe McDaid, parliamentary adviser for the Organisation Undoing Tax Abuse, is of the opinion that the two portfolios should never have been merged.
"It’s based on old thinking that energy comes from fossil fuels and is linked to mining. That’s no longer the case, as renewable energy technologies come to the fore and mining remains a sunset industry," she says. "Mining would be better suited in the economic development or trade & industry portfolios than paired with energy."
Institutionally, the pairing has proved to be a nightmare, says Intellidex’s Peter Attard Montalto. "There is yet to be effective integration … and we’ve seen this in particular over excessively long times to gazette regulation already ready in the department," he says.
There’s also a colossal link missing from Mantashe’s value chain: Eskom.
The monopoly power utility continues to face an operational and financial crisis. Before Covid-19 it was by far the largest millstone around SA’s neck.
But the power utility doesn’t fall under Mantashe; its operations are the responsibility of the department of public enterprises, under Pravin Gordhan.
Mantashe reportedly called for Eskom to be placed under mineral resources & energy at an ANC national executive committee meeting in January. But now, he says no such thing. Rather, he suggests that Eskom should fall within the ambit of public enterprises, which can provide the dedicated oversight that problematic entities need.
"Public enterprises is an interventionist portfolio," he says. "Some way into the future, I can assume when Eskom is pounding along on all six cylinders, it will go back to energy. But it is now in public enterprises."
Still, he says, the policy that governs Eskom falls to his department, even if the workings of the utility don’t.
Luzipo admits that Eskom operations often come up at the meetings of parliament’s mineral resources & energy committee, despite not falling within the portfolio.
"I have to caution my members, when they talk, at times, about Eskom as if it is accountable to them. You end up arguing about Eskom and what it should do," he says.
For the flow of policy into action, having Eskom fall under energy would be preferable, Luzipo says. "I don’t want to speak outside my mandate but, in my view, it would have been much better for accountability — for consequences."
Eskom’s problems undoubtedly hinder SA’s energy policy. That was evident in years gone by, when the utility refused to sign power-purchase agreements with independent power producers (IPPs). This held up the rollout of renewable energy in SA for two years, killed local manufacturing plans and hurt investor sentiment.
Unbundling Eskom is now the key to reforming the energy sector — but that, ironically, is outside Mantashe’s control.
For more renewables to feed into the grid, McDaid says Eskom must be restructured. "We need the grid to be independent. Eskom has been dragging its heels on its restructuring and we are not hearing anything about a plan and a time frame," she says.
Load-shedding
McDaid believes Mantashe should have done more to intervene late last year, when Eskom implemented stage 6 load-shedding for the first time.
"Everyone just blamed Pravin, [and] Gwede appeared to wash his hands of the crisis," she says. "As minister of energy, if Eskom wasn’t able to deliver, shouldn’t he have stepped in?"
McDaid believes there has been little creative thinking around policy interventions that could shift behaviour to help meet power demand. For example: shifting time zones, where half the country wakes up 30 minutes earlier, could go a long way to flatten peak load demand.
But Mantashe insists he is focused on stabilising energy. "That’s why, if you look into our proposal [his broader plan for the portfolio], we must continue generating electricity even outside Eskom. And you are going to see projects coming out of the ground."
A big part of his big plan is the updated Integrated Resource Plan (IRP), a long-awaited policy document that was published within a few months of Mantashe taking over the energy portfolio.
The IRP maps out what SA’s power mix will look like up to 2030. It’s meant to be updated every two years, but the 2019 version was the first to be published since 2010 after an attempt to force a nuclear build into the model during the tenure of former president Jacob Zuma frustrated the process.
This policy document now makes way for green energy, while phasing out coal-fired power. It’s been generally well received.
Renewables has by far the biggest growth allocation in the IRP, Mantashe says.
"It’s the biggest, but all the time when you talk to people in renewables, they complain … they think they can grow by killing other technologies. They have been given the space to grow, they must establish themselves. Grow — [the] space is there," he says.
"Coal is the biggest decline in the IRP [but] many people who are ideological about coal think we must just shut coal down."
But the pace at which the IRP is being rolled out is also far too slow for comfort.
McDaid says Mantashe’s department has dragged its heels on the latest round of the programme to buy green power from IPPs. These determinations should have been put to the National Energy Regulator of SA (Nersa) for approval last year, but they were signed only in February.
Kevin Mileham, the DA spokesperson for mineral resources & energy, agrees this should have been done sooner. "The earliest we are looking at calling for bids [to buy green power] is early next year," he says,
It means this green power will probably only connect to the grid in two years.
Mantashe’s response is a well-worn refrain: "I do not want to be bullied by lobbyists."
Still, he maintains that the launch of the next round is imminent. In fact, as far as he is concerned, everything is in hand.
"We issued a request for information. We issued section 34 ministerial determinations [required to give effect to the IRP] — we sent them to Nersa for concurrence — then we will open bid window five."
The other determination relates to the government’s emergency power procurement initiative (which the IRP makes room for) which will allow it to buy about 2,000MW that can be online by December 2021.
Apart from this, the department says it is also in the process of securing 128MW of extra power from existing IPPs.
Post-pandemic planning
University of Cape Town professor and energy expert Anton Eberhard says it’s urgent that SA prepare plans for economic recovery in the post Covid-19 era — and that means buying new power, starting now.
"It takes time to run power procurement programmes, award contracts, obtain the required permitting and licensing, obtain financing and reach financial close, construct plants and reach commercial operation," he says. Adding to this is that many processes will be held up, as Nersa is partially closed under stage 4 of the nationwide lockdown.
Critically, he says, Mantashe can’t initiate the purchase of more power while he’s waiting on Nersa to approve his section 34 determinations on the need for it.
Eberhard says investments in decentralised energy must also be accelerated.
"There is a huge pipeline of projects that seek to install solar PV [panels] on the roofs of not only residences, but commercial and industrial properties," he explains. "Typically, many of these are in the 1MW-10MW range, which requires such projects to be licensed by Nersa."
In February, as load-shedding gripped the country, Mantashe took to the main stage at the annual mining indaba and masterfully changed the conversation. He boldly declared that big businesses, such as mines, would soon be able to generate their own power without having to go through the cumbersome licensing process.
But for this to happen, schedule 2 of the Electricity Regulation Act must be amended. This law requires any self-generation project of more than 1MW (enough to power 650 average homes) to be licensed by Nersa. However, big industry has been calling for the 1MW threshold to be lifted to 10MW so that larger generation projects can go ahead without the red tape.
In March, Mantashe did, in fact, make amendments to schedule 2. Now, back-up generators used when there are power supply disruptions do not need to be licensed or registered with Nersa, and neither do projects that require no grid connection.
But the 1MW cap on licence exemptions for power projects remains in place.
So why not lift it?
"For what?" Mantashe asks. "There is the 1MW, [licensing exemption], then there are unlimited amounts. [Companies] can generate any number [of MW], they apply for the MW they want … What is the problem? We have 17 applications at Nersa that are being processed now."
However, Eberhard argues that lifting the licensing exemption to 10MW would immediately free up a "huge pipeline of investment". He argues that where the project is simply to generate power for your own use, and not to sell-on to anyone, the exemption should be for projects of any size so that mines and large industries can invest in their own power supply.
"These are simple regulatory reforms that can be implemented within a short time and would help SA move to a situation of more secure and sustainable electricity supply to support our economic recovery," he says.
Mantashe, however, remains unmoved: projects of more than 1MW must go through the licensing process, so that surplus power can be sold into the grid.
Even though many industrial users are looking at projects that will supply only their own operations, Mantashe is adamant that there will be projects that generate more power than they need. "If they get [to have] a surplus and they sell it, we will arrest them for illegal trading. People must get generation licences, and run their self-generation, sell the surplus into the grid."
Positively, Mantashe last week released draft amendments to the Electrictity Regulation Act that would enable municipalties to develop or procure their own power generation.
Pushing transformation
Coal remains a fraught area of Mantashe’s portfolio.
Already, as banks come under pressure not to finance coal, new projects like Thabametsi and Khanyisa have seen lenders turn their back on them. And that’s before the mounting legal challenges they face from environmental rights groups.
The DA’s Mileham believes that Mantashe, though perhaps no longer a mining man, remains very much aligned with mineworkers — particularly in the coal sector, which Mileham says is "top of mind for him".
Mantashe says the media paints coal as unpopular, but he doesn’t believe that’s the case. He says he loves the stuff.
"I love it, I just love it," he retorts to a question on the issue.
In fact, he believes coal is at the forefront of transformation in SA.
"Seriti Resources, which has bought all the Eskom supply companies from Anglo Coal and [imminently] South32, [is] a black company. When that happens, I say we are making progress," he says.
"When I look at Exxaro and I know just over 30% of Exxaro is in black hands, I’m happy. When I look and see an army of smaller coal mining companies, black-owned by young professionals, I say that is what we need to do."
There are similar examples in manganese, though Mantashe says transformation has been slower in gold and platinum. But he says that across the mining sector, management is made up of no less than 50% black executives. It’s for this reason that the mining industry’s legal challenge to the third iteration of the mining charter isn’t causing Mantashe to lose sleep.
The most contentious clause in the new charter is the principle of "once empowered, always empowered" — which means that if a mining house has already done a BEE deal, it keeps those points, even after those black investors have sold. But this clause is missing from Mantashe’s newest charter, which means companies would then be obliged to do new deals to hold onto mining rights.
This is what the industry is challenging.
Mantashe says the industry wants the government to recognise value based on partnerships that were forged a decade ago, and even where the black investor often has nothing to show for their involvement other than debt. "If it is an ideological fight we must fight, we will fight it. But it is not the beginning and end," he says.
Returning to the fact that the new IRP sets aside an allocation for new coal-fired power, Mantashe believes this will happen. He’s looking at a project involving coal carbon capture and storage — which allows for "cleaner coal" as plants use a new technology to capture 90% of the carbon dioxide produced.
"That person is not asking for funding from us. They are saying: ‘I’ve got funding, I want to start this so I can be a leader in cleaner coal technology.’ We are looking seriously into that proposition."
But what if coal cannot be saved? Already there is a lot of talk about a "just transition" away from coal, but little action. It means that some coal-mining communities appear doomed to become ghost towns.
The "just transition", Mantashe says, is about developing an alternative economy in coal-orientated areas. He has ideas in mind. For example, the department is in talks with the Mozambican government to potentially supply gas to repurposed old coal-fired power stations in Mpumalanga.
"That’s a serious intervention," he notes.
On the policy front, Mantashe has also delivered a draft Upstream Petroleum Resources Development Bill to unlock development of SA’s oil and nascent gas industry, following a large gas find by Total off the coast of Mossel Bay. Developing that policy is a priority, he says.
But independent consultant Niall Kramer says: "After Covid-19, SA Inc and the energy ministry need to decide if we still have upstream production aspirations and a genuine intent to explore for and produce [oil and gas]."
Kramer says Mantashe must recognise that the oil and gas markets are now in a "new abnormal". This means the final investment on huge exploration projects, like in Mossel Bay, will be cut or, at best, delayed.
"To compete, we need the government to accept we can only change the above-ground conditions like fiscal terms and ownership requirements, and we will only be attractive if we can compete globally for reducing capital."
Whether it be oil and gas, renewables or generating more power, the resounding call to Mantashe is unchanged: "move faster".
Having worked in the public and private sectors, Mantashe says he has experience of the speed in which things are done in both.
"I was a worker in the mines. In one mine I was taken from my workplace at 10am. At 12 noon, I was fired. At 2pm I was down at the station to go home. So that is very fast, huh? If that is the speed you want I would say look at it differently … move with the right speed."
Presidential pressure
Attard Montalto, however, has detected a subtle shift in tack from Mantashe since President Cyril Ramaphosa started putting pressure on him at the start of the year.
"The president appears to have correctly seen the minister as a huge blockage to reform and solving the energy crisis but equally, politically, not removable — and hence he has to get him to act," he says.
Not that Ramaphosa would want to risk axing Mantashe, who is part of the "top six" of the ANC’s national executive committee. Mantashe has been seen as one of those most loyal to Ramaphosa in that group, alongside Paul Mashatile. In contrast, Ace Magashule and Jessie Duarte have been cast as hostile to Ramaphosa, while deputy president David Mabuza remains "neutral".
Attard Montalto doubts that the pressure on Mantashe will yield much — particularly as Ramaphosa doesn’t have an energy adviser in his private office. Mantashe, says Attard Montalto, is not taking the steps to liberalise the market at a decent speed.
"Many in the energy industry are not confident that the energy crisis will be solved with Mantashe in position. The energy crisis will be back next year as the economy recovers.
"Till then, there is little incentive to do anything about it, given no load-shedding."
Mantashe, however, insists that the conversation will have moved on by then.
"We are not going to talk about the same things next year. I can tell you that by next year there is going to be a gas-fired power station somewhere. And in all likelihood, there would be a coal power station from carbon capture and storage. I can tell you, this time next [year] window 4 will be connected to the grid and window 5 will be under construction."
It’s a big promise. Now that he’s put a time frame on it, SA will be holding its breath to see if he delivers.
When it was announced that mining and energy were to be merged, concerns arose that the portfolio would be too big for one minister to run effectively
— What it means:
Stabilising SOEs
When the cabinet’s energy portfolio was merged with mineral resources last year, minister Gwede Mantashe inherited a string of troubled state-owned entities (SOEs) that had to be fixed.
Mantashe says his priority has been to fix governance at energy SOEs by appointing boards and filling key vacancies — including the CEO positions at the Central Energy Fund (CEF) and the SA Nuclear Energy Corp (Necsa), and hiring a full-time electricity regulator at the National Energy Regulator of SA (Nersa).
This week the CEF — the holding company for PetroSA, the Strategic Fuel Fund and others — announced it had filled the CEO positions at its various arms, marking the first time in six years that all those entities have permanent leaders.
As far as Mantashe is concerned, governance at the energy SOEs is now "sorted". But he admits that of all the entities, PetroSA and Necsa worry him most.
PetroSA faces a feedstock crisis as it runs out of gas this year, but Mantashe says the company is "on it [the issue] every day", and he now has its corporate turnaround strategy in front of him.
Meanwhile, Necsa has failed to submit financial statements for two years. Its profitable subsidiary NTP — which makes radioisotopes used in medical treatments — experienced months of stoppages due to safety issues in 2018. This appears to have stabilised, however.
But in terms of governance, Necsa is far from sorted.
For one thing, it has its third board in 17 months. The previous board "disappeared in front of me", Mantashe says. "When there were three [directors] left, they left all together and I appointed a competent board within days."
That was in January. But insiders say the remaining three board members could no longer hang on due to frustration at Mantashe’s refusal to repopulate the board.
Mantashe gives little away in response; he simply suggests that a board cannot have "contrasting interests to a shareholder and think it is justified to be a board".
It’s an interesting point — some may dispute that what’s good for the government, the shareholder, is always good for SA too.
There’s also intrigue over Nersa’s CEO, Chris Forlee, who was suspended just ahead of the lockdown, pending an investigation into allegations of impropriety.
DA spokesperson for mineral resources & energy Kevin Mileham points out that the entity has been well run, with consistently clean audits every year. "You question why they want to take on the CEO," he says.
Was there some other motive for wanting Forlee removed, then?
According to EE Business Intelligence MD Chris Yelland, who says he’s had sight of documentation related to the suspension, Forlee faces two charges: that he awarded himself a salary increase improperly, and that he wrongly approved rooftop solar projects.
Yelland says these "trumped-up" charges appear to be the same as those made against Forlee last year.
They were investigated at the time, and legal opinion was sought, but no action was taken.
Mantashe says it was he who called for Forlee’s suspension. "If you are clearing the man, clear him. If you are charging the man and firing him, fire him. But you can’t keep it hanging," he says. "There are a number of such cases, where we say: ‘Now that we have boards, deal with these things.’"
But the intrigue around Forlee suggests that the days of inscrutable politics playing a role in board machinations at SOEs are far from over. With Mantashe’s department at the forefront of powering SA, he can’t afford this.
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