June 20, 2023 • 44 mins
We all take for granted that nifty little miracle that happens when we flip a switch on our walls or lamps – the lights go on. Electricity is a modern marvel. It’s the juice that fuels much of what people mean when they talk about “civilization.” When we lose access to electricity, we feel the pain immediately. What we’re used to doing collides with what we suddenly can’t do. Now consider South Africa: the second-largest economy on the African continent and home to 61 million people. The entire country has faced rolling blackouts for about 15 years. How can that be? And what does the present and future hold for a country that doesn’t have a reliable source of electricity? During a trip to South Africa, Tim spoke with Paul Burkhardt, an energy reporter with Bloomberg News in Cape Town, and Olga Constantatos, a South African investor who has spent years watching the power crisis escalate in her country.
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Speaker 1 (00:01):
Welcome to Crash Course, a podcast about business, political, and
social disruption and what we can learn from it. I'm
Tim O'Brien. Today's Crash Course. What happens when the lights
go out? We all take for granted that nifty little
miracle that happens when we flip a switch on our
walls or lamps, the lights go on. Electricity is a
(00:22):
modern marvel. It's the juice that fuels most so what
people mean when they talk about civilization. Roads are illuminated,
Kids can do their homework at night, food gets preserved
in the fridge, Computers boot up, elevators move, et cetera,
et cetera. Coal fired power plants also have a major
downside pollution and environmental degradation. When we lose access to electricity,
(00:47):
we feel the pain immediately. What we're used to doing
collides with what we can suddenly not do. Millions of
people in Texas lost power for days when the grid
there sees In early twenty twenty one, Puerto Rico went
through weeks and then months of rolling blackouts following devastating
hurricanes several years ago. Now, consider South Africa, the second
(01:09):
largest economy on the African continent. And home to sixty
one million people. The entire country has faced rolling blackouts
for about fifteen years. How can that be?
Speaker 2 (01:20):
Then?
Speaker 1 (01:20):
What is the present and future hold for a country
that doesn't have a reliable source of electricity? I'm in
South Africa. Then, joining me to discuss all of this
is Paul Burkhart, an energy reporter with Bloomberg News in
Cape Town, and Olga Constantatos, the South African investor who
has spent years watching the power crisis escalate in her country. Paul,
let's start with you. Thanks for joining us.
Speaker 2 (01:42):
Thank you.
Speaker 1 (01:43):
So let's just start with a little background for everybody
out there who takes electricity for granted but actually doesn't
know how electricity is produced. Give us a little primer
about how the jew sends up in the wires.
Speaker 3 (01:56):
Sure, and I'll use the South African example. Basically, South
Africa is very rich in coal, so they saw coal
is really the optimal fuel and what they do is
the mine the coal that goes straight into the power plant.
They built the power plants right next to the coal
mines basically, so they have conveyors that end up running
(02:17):
for miles as they mine more and more of the coal.
Out the coal, it's pulverized and then it's burned in
the boiler. That heats up the steam that powers the
turbine which powers the generator, and that turns into electricity
and then it goes through the transmission network. And in
South Africa, the coal rich area is far away from
(02:40):
some of the other population centers, so the transmission lines
run very far in some cases.
Speaker 1 (02:46):
Yeah, and the electricity goes through the wire, then gets
transformed and ends up in businesses, are in people's homes,
and in South Africa in particular, all of that essentially
runs around one company called ESCOM, or the Electricity Supply Commission.
Tell me a little bit about SCOM, this company that
(03:08):
occupies a monumental and fundamental position in South African life.
Speaker 3 (03:15):
ESCOM is, well, it's one hundred years old this year.
And really it came about with the mines in South Africa.
Obviously needed power to extract the mineral resources here, so
that was really the need for it. And then as
it rose, it was basically a monopoly. It was a
state owned monopoly, and later on really industrialized the country
(03:39):
even through apartheid, and so South Africa needed to be
self sufficient in terms of electricity production, fuel production, and
so ESCOM was one of the really the pillars I
guess of how it achieved that.
Speaker 1 (03:54):
And sort of a trophy enterprise and state owned, which
meant it produced electricity pretty much cost So for South
Africans who had access to that electricity, they were getting
a really cheap way to electrify their homes and businesses.
But you've also mentioned that it's a state owned enterprise,
and inevitably companies that are state owned, their affairs and
(04:17):
their business gets mingled with politics and what does that
meant for ESCOM.
Speaker 2 (04:21):
It complicates things quite a bit.
Speaker 3 (04:23):
And it's funny because if you sometimes if you go
to ESCOM and you ask about something, they say, oh,
that's really a question for the government. And sometimes if
you go to the government shareholder, which is the ministry
in charge of ESCOM is the Department of Public Enterprises,
if you ask them things about ESCOM, sometimes they'll say, oh,
that's an ESCOM board question, or that's really for the utility.
(04:46):
We don't deal with that. But there is a very
close relationship between the two and I think that's been
an issue for the leadership of ESCOM sometimes and how
it runs the company because it really does need to
do it in a way that's approved by government ultimately.
Speaker 1 (05:03):
Another thing that's interesting to me about scom's history is
electricity is a precious resource. It powers a society, and
when ESCOM first came into being, it only had to
provide electricity to about ten percent of the South African population,
and then the businesses that population controlled mining and other businesses,
(05:25):
which meant that ninety percent of South Africans, a significant
portion of whom we're black, had no access to electricity.
And over the last century, as apartheid ended, as ESCOM evolved,
as the South African economy evolved, one of the missions
for ESCOM came to be providing electricity and power to
(05:47):
one hundred percent of the population, but from a company
whose origins were only having to provide electricity to ten
percent of the population, So it had this mission to
give everyone access to power, but had never really been
built for that mission. Do you see that as almost
like a deterministic or faded at birth kind of problem
(06:09):
baked into it that because of apartheid, ESCOM wasn't built
properly to fulfill the mission people are demanding of it today.
Speaker 3 (06:18):
Well, there are a couple different parts to that. Certainly,
the domestic demand I think went up quite a bit,
and then electricity is actually a right in South Africa,
so that became very important. But on the other hand,
the democratically elected government since nineteen ninety four, there were
some bumps in the road in terms of policy, and
(06:39):
that includes building more capacity for ESCAM, and I think
it was known that they were going to need more
with supplying more power to residential areas and also just
with economic growth for the country, they were going to
need more power capacity and there were a lot of
stumbles there and there are a lot of miss aps.
(07:00):
And for example, to the biggest power stations that ESCOM
has built and still being finished, they were behind schedule,
They've become overbudget, they've been delayed by corruption, by labor strikes,
just a number of different things that sometimes even have
included bigger companies that we would recognize like ABB McKenzie.
(07:25):
That's all been part of some of the recent history.
And so there were just a series of mishaps that
didn't bring on the extra power when it was supposed to,
and that's one of the reasons that ESCOM is in
this situation.
Speaker 2 (07:39):
It's in right now.
Speaker 1 (07:41):
You said an interesting thing a moment ago, when you
were explaining all this to me, you said that access
to electricity is a right in South Africa. Let's talk
a little bit more about that. Access to electricity was
baked into the legal code. No one could be denied
in theory or according to the law, access to electricity.
Why did that get enshrined as such?
Speaker 3 (08:04):
Well, I think that in South Africa, especially after ninety four.
Obviously South Africa has a very robust constitution.
Speaker 1 (08:14):
And ninety four, for our readers, that's when Nelson Mandela
comes to power, the great hero of both the pre
and post apartheid eras the man who sort of bridged
Africa's troubled, sordid grotesque passed and some of the hopes
of its future. That era was full of promise in
nineteen ninety four, and of course es COM and electricity
(08:35):
were part of a vision for hope and change.
Speaker 3 (08:38):
That's right, and then the party, the African National Congress
that came to power. With the rise of the African
National Congress, there was also the hope and the promise
that things were going to change for everyone, that services
were going to change for everyone, whether it's sanitation, transportation
and electricity, and so there's been an increase in electrification
(09:02):
rates like of the nation.
Speaker 2 (09:04):
But the process isn't done yet.
Speaker 3 (09:06):
But that was just seen as something that needed to
be really in the quest for equality, especially now that
there's a democratic government in place, that should be expected
and it's actually a right for people to have that.
Speaker 1 (09:20):
And I don't think anyone would disagree that a hallmark
of a civilized society is that people have access to
the power they need to improve their standard of living
and increase their access to opportunities. The tricky thing when
we look at the history of s COM is that
that's all entwined with both human nature and human frailty
(09:42):
and the difficulty that any big complex company composed to
people managing it effectively wherever the country is, whoever's running it.
But over time in South Africa, s COM really became
many things. A piggy bank for the people who can
rolled it, an influenced machine, patronage for jobs for people
(10:04):
connected to the party in power, a source of hope
if managed well. But we now know, given what's happened
for over a decade here, that it is mismanaged and
it is not modernizing and it's not fulfilling the promise
of actually giving reliable energy generation to every South African
(10:25):
How did we get there? Why has ESCOM become this
slow motion car crash.
Speaker 3 (10:31):
There are a few things that have proved to be
troublesome for ESCOM and the government for that matter, and
one is making decisions when they need to make them.
So actually building the extra capacity that was one issue,
and that was delayed, and then when it did happen,
there was no EPC basically a contractor that would oversee
(10:53):
the other contractors. ESCOM wanted to do it itself as
kind of a project that could show the world that
it could build these massive power stations, the biggest in
the world currently, and it just didn't go well. And
there was also the graft was starting to show up
at that point, and labor issues and a number of
(11:13):
other things. Certainly corruption is something that you could find
even back in the apartheid era with some of the
contracts there how those operated, but it did get much
worse in terms of just the scale of it.
Speaker 2 (11:28):
On one hand, I.
Speaker 1 (11:30):
Want to take a break right there, Paul here from
one of our sponsors, and we'll come back and continue
this fascinating conversation. We're back with Paul Burkhart, a Bloomberg
News reporter, and we're talking about South Africa's electricity nightmare. Paul,
let's discuss what it means on a day to day
basis when people don't have access to electricity, businesses, homes.
(11:56):
What are the ramifications of not having a reliable energy source,
both for people themselves and for an economy.
Speaker 3 (12:04):
Yeah, for one thing, I got home yesterday and the
lights went out. Load shedding started, which is what South
Africans call these power cuts.
Speaker 1 (12:13):
They call it load shedding. Where does the term load
shedding come from? That? Basically, the company itself is finding
ways to slough off some of the demands that are
on it to generate electricity so the grid doesn't get overwhelmed, right.
Speaker 2 (12:27):
That's exactly it.
Speaker 3 (12:28):
It's designed to prevent a total collapse of the grid.
So you know the frequency of the electricity can't drop
to a certain level, so they want to cut off
that demand from certain areas. And here they rotate it
regionally and it'll be in different stages. So each stage
is one thousand megawatts, So stage one, Stage two we've
(12:50):
been at stage six quite a bit.
Speaker 2 (12:52):
They try to schedule it.
Speaker 3 (12:53):
But sometimes it comes up quickly. They can't always do that,
and it really depends on the performance of the power stations,
and because they're underperforming and they've become so unreliable, it
happens quite often. And so yesterday when I came home
and it was just about time to make dinner and
the lights went off. So that's a very simple way.
The traffic lights don't work, and then sometimes when the
(13:16):
power comes back on again, they still don't work. So
all the electronic items in your house and your appliances
and the things that stay on normally when they're turned
on and off too much and they weren't designed to
do that, eventually they're going to break a lot faster
than if it was just normal use. I noticed my
laptop batteries really on the fritz now, So that's another example.
(13:40):
But on a much more serious side of the scale,
we've seen it start to creep into water supply and
sewage treatment. Where the electricity goes off, the pumps don't
work if there's not a backup, then you know, in
terms of providing water supply, they can't get pumped up
to the water can't get pumped up to higher lying area.
(14:02):
But in terms of sewage, obviously here in Cape Town
they've closed some of the beaches in the last tourist
season because there was raw sewage going into the water.
So that's a problem and obviously very scary, and recently
with some cholera outbreaks in the country, than the prospect
of things getting worse, it's there.
Speaker 2 (14:21):
It's very close.
Speaker 3 (14:22):
And in terms of food production too, I think it's
also has been interesting when a slaughterhouse loses power, it
can't slaughter food, so you get a backup of chickens
or whatever, a.
Speaker 1 (14:36):
Backup of rotting chickens if they've been slaughtered.
Speaker 3 (14:39):
Yeah, and which you have to do something with at
some point. And it just the whole supply chain. Even
in the grocery store, the food on the shelves sometimes
there isn't as much of because all through the process
from the farm to the grocery store, the refrigeration, if
the power goes out and there isn't a backup, then
(14:59):
your food.
Speaker 2 (14:59):
Is not going to last as long.
Speaker 3 (15:00):
Then when it makes it into your refrigerator and the
power goes out quite a bit, you know, you don't
want to eat chicken. That's been thought a few times,
so it really creates a lot of health issues too.
Speaker 1 (15:11):
And speaking of health issues, hospitals themselves rely on electricity
generation in order to treat patients, to examine people, to
house them safely when they're ill, So the hospital network
gets threatened. And then what happens on dark streets more crime,
So those are issues as well. The crime rate has
been rising in already crime ridden neighborhoods around Cape Town
(15:33):
and in other cities around South Africa. Are there any
other ramifications that are front of mind for you when
people are deprived of electricity?
Speaker 3 (15:42):
Certainly, the prospect of social unrest is something that everyone
is aware of because there are already demonstrations quite a
bit in a lot of areas in South Africa where
really any services haven't been delivered to a satisfactory degree,
so people protest in the streets. And this would mean
without power and without it for an extended period of time,
(16:05):
that would create even more of that type of activity.
Speaker 2 (16:08):
But what you're.
Speaker 3 (16:09):
Seeing is even insurance policies have been rewritten to exclude
periods of load shedding, and the prospect of that is
also really scary. Because what are people going to do
if they're not going to be able to claim insurance
on things that are taken or destroyed or whatever happens
when the lights do go out. So we're on the
(16:30):
verge of something that could get much.
Speaker 1 (16:32):
Worse, something that could get worse, much worse in terms
of a failed state or just a mounting series of
social problems that people are going to be challenged to
deal with.
Speaker 3 (16:43):
Yeah, I think primarily just the obstacles that people have
to deal with and just growing unrest really and the
fact that if these power cuts deepen even more and
you know, there's room for them to before there would
be a total collapse, it's just going to mean businesses
are shown for longer, and especially in lower income areas
like townships. They've found that two thirds of the businesses
(17:07):
have had to lay people off because of load shedding,
specifically because they just can't keep those businesses running and
so they're not able to make enough money. And we
see a lot of that. So if you take everything together,
then it's just it ruins business and it really makes
it impossible kind of to get through the day. And
I think eventually just that anger rises and doesn't turn
(17:29):
into anything good.
Speaker 1 (17:31):
One avenue for turning that around would be just to
effectively manage s COM itself, modernize the grid, get it
ready for a new era, help with green energy transitions.
But s COM has been sort of riddled at times
with almost tragic, comically crazy circumstances. You and I were
talking recently together about one of the former CEOs claims
(17:53):
he was poisoned. He was trying to clean He says,
s come up and get it on a new track,
and he became subject of threats. He eventually fled the country.
He got the job after literally I think two dozen
other people turned it down. In an environment like that,
where corruption is rampant, where change has resisted to the
(18:14):
point of threatening people with death or violence, it doesn't
bode well for getting management into ESCOM that is capable
and willing to turn things around.
Speaker 2 (18:25):
Yeah, it's difficult.
Speaker 3 (18:26):
I think some people who work at ESCOM feel like
it's their patriotic duty.
Speaker 2 (18:30):
I think that's what keeps them going.
Speaker 3 (18:32):
So I think there are a lot of things to
be hopeful about in terms of leadership and people wanting
to do the right thing, and especially a lot of
the workers within escammun there are thirty eight thousand employees there,
so surely most of them have to go to work,
you know, believing that they're doing good for the country
(18:53):
and that they want to turn this around. But obviously
there's a search for a CEO right now, and it's
hard to imagine who would want to take that job,
but I'm sure they'll find someone and then they will
have to face the same issues in terms of really
their relationship with government and how they get things through.
And there are so many different figures that participate in
(19:18):
trying to fix the problem that that becomes a problem
in and of itself.
Speaker 2 (19:22):
Sometimes.
Speaker 1 (19:23):
How do you think when you look down the road,
how do you think this problem gets sorted? What is
the solution.
Speaker 3 (19:29):
One positive thing that we're seeing is certainly there's encouragement
now even by ESCOM, which hadn't been well. It was
only in the recent past really that they were trying
to bring in private companies to generate more power as
COM typically and there's still a large faction in South
Africa that would want ESCOM to survive as a behemoth
(19:51):
and you know, a state owned company. But there's certainly
the door has opened really out of necessity to bring
in more private production, so that will work. That's rising,
and that will work, it's just a matter of time.
And the problem is that most of the population will
remain disenfranchised by that. If COM's prices are going up
(20:12):
for electricity and private power is supplying private business, or
you're building it if you can, or you're building it
if you can afford it as a business or as
a resident, it still leaves out the majority of the
population that have to rely on ESCOM. So that's where
the real variable is, and that's where they really need
(20:33):
to come up with the solution and really get on
the ball with a lot of initiatives that they've had
in terms of building more renewables, just bringing in other
power because the cost of blackouts is so great that
in almost every case it's going to be cheaper just
to bring in even the most expensive power supply you can.
Speaker 1 (20:56):
And of course businesses and more affluent residents have the
option of getting their own generators or buying power from
other resources. Low income people don't have those options, So,
as you noted, it simply further deepens these income and
social chasms that divide the population. You know, Paul I
always like to ask people during the show what have
(21:17):
they learned from a collision that we're talking about.
Speaker 2 (21:21):
What do you know now.
Speaker 1 (21:23):
About either the value of electricity or the importance of
SCOM in South African society that you didn't know those
many many years ago before you started covering energy and
SCOM so closely.
Speaker 3 (21:38):
Well, what's kind of funny is you could probably ask
just about anyone on the street. We could walk out
of this building and ask just about anybody about ESCOM
and they'd be able to tell you all about capacity,
energy availability factor, a lot of technical things. Everyone in
this country knows what's happening with the power system. So
(21:58):
everyone here has learned a lot. And I've certainly learned
just some of the technical things about transmission grids, for example.
Speaker 2 (22:06):
In bringing in more renewable energy.
Speaker 3 (22:09):
One of the issues that South Africa has faced is
they don't have enough room on the grid in the
most optimal parts for sun and wind, and so that
filled up. And you see these issues coming up in
other countries, in western countries, but you see them here first.
So if you want to look at a place where
(22:30):
the extreme has been reached, then you can look at
this model. And so I think I've realized just a
lot of the shortcomings of you know, even if you're
looking at clean energy, which is really positive development, it
has its limits that you have to admit and that
you only build so fast or you can only you know,
(22:50):
use during certain periods, and the reality of that I
think comes up here quite a bit.
Speaker 1 (22:57):
Paul, We're going to take a break and then I'm
going to bring another to board to talk about SCOM
and South Africa's power problem. But thank you for joining
us today.
Speaker 2 (23:04):
Thanks very much. It was great.
Speaker 1 (23:11):
We're back and we're joined by Olga Constantatos, an investor
with Future Growth Asset Management in Cape Town. Olga, we've
been talking about South Africa's years long struggle to provide
its residents and businesses with electricity, and I wanted you
to join us for two reasons. One you're the go
to person when people try to divine the future of
(23:31):
South Africa's power company s COM, and two you have
skin in the game. Your firm owns a big chunk
for the company's debt. Thanks for joining us today.
Speaker 4 (23:42):
Thank you Tim, Thanks for having me.
Speaker 1 (23:43):
You know, I'm fascinated by es COM because it's not
just a company story or even the story of one
country struggle to provide electricity. It's about economic development and
how states and businesses improve everyone's standard of living. And
that's really not happening right now Africa.
Speaker 2 (24:00):
Is it.
Speaker 4 (24:01):
Well.
Speaker 5 (24:02):
No, the rolling blackouts that you mentioned at the beginning,
since two thousand and seven, and it's been on an
off it hasn't been a permanent feature, have really impacted citizens' lives,
have impacted businesses, have impacted economic growth in our country,
and certainly the escalation of load shedding in more recent
history has very negatively impacted our future, our outlook, and
(24:23):
really everything about the economy. Escom's problems are intertwined with
the country's problems, and so solving ESCOM really puts us
on a much more sustainable path to economic growth and prosperity,
which we as a country desperately need.
Speaker 1 (24:37):
And is that a problem in your mind? That is
there a solution available to the problem the country faces
when it's single its only electricity generator is so deeply troubled.
Speaker 4 (24:52):
I think yes.
Speaker 5 (24:53):
The solution to escom's problems doesn't lie with one particular
intervention or one particular solution. Solutions of multifaceted the problems
are multifaceted. So escom's problems didn't start last week or
last year. They started a good few years ago. And
so the solutions to ESCOM lie in cost reflective tariffs,
They lie in addressing its unsustainable debt burden that it holds.
(25:16):
It lies in fixing the very high and unsustainable cost
base and addressing some of the corruption, maladministration, Malfieson's misspending,
all of that.
Speaker 1 (25:28):
So so far you've given me four things and they
all sound huge. Right, So when you talk about tariffs
for the outside listener, you're talking about price increases to.
Speaker 4 (25:36):
Users, right exactly, that's correct.
Speaker 1 (25:38):
Have there been massive price increases passed along to businesses
and residents in the country for years, so they have.
Speaker 5 (25:46):
The rate of increase of Escom's tariffs have increased beyond
what inflation has increased. I think the problem with ESCOM
is that it's in a classic utility death spiral. So
the tariffs, even though they have been increasing, are not
enough to cover.
Speaker 4 (26:00):
But it's very high cost base.
Speaker 5 (26:02):
So the tariff's are one part of the equation, but
addressing the very high cost base also needs to happen,
and that hasn't happened.
Speaker 1 (26:08):
You said the scary term death spiral. Do you think
of that as a financial death spiral? In other words,
the company is saddled with so much debt and the
coupons it's paying out on that debt relative to the
amount of revenue it's bringing in, and there are no
easily replenishable or other sources of revenue that can make
(26:28):
up for that debt burden that it's saddled with. Is
that when you use the term death spiral, is that
what you're referring to.
Speaker 5 (26:34):
So there's a death spiral at Escom, the utility death spiral,
and a debt spiral.
Speaker 4 (26:39):
So let's unpack it. The utility death spiral is what
you talk about.
Speaker 5 (26:43):
Where the revenues are increasing, it then means that users
then decide they want to go for less expensive alternatives,
so they then remove themselves from the grid or they
reduce their consumption from Escom. So as the tariffs go up,
so more people are parting from Escom making other alternatives,
and that means then that you need to recover your
(27:06):
costs from a smaller user base, which means higher and
higher tariffs.
Speaker 4 (27:10):
And it becomes the spiral.
Speaker 5 (27:11):
As the tariffs get even higher than more people then
those that can find alternatives, You then have to recover
the cost base from a smaller pool each time.
Speaker 4 (27:20):
That's the utility death spiral.
Speaker 5 (27:22):
The debt spiral is similar but different in that ESCOM
isn't generating enough cash flow to service its debt, and
so the capital structure of ESCOM is just not fit
for purpose, and so it is unable to service its
debt meet its debt obligations without significant intervention from its shareholder.
Speaker 4 (27:39):
That's the debt spiral. So it's the two together.
Speaker 1 (27:42):
And I have to think to myself, what's a nice
woman like you doing in a place like this, because
you own some of that debt and you're shrewd, you're smart,
you're informed, you're experienced, you've been around the block, and
you're hanging in there as a debt holder and as
someone who is much less sophisticated than you are about
these things. And I don't know the history of the
(28:03):
company as well as you do. I'm not familiar with
the management, and I'm sure you're steeped in an understanding
of the management there. Why are you hanging in Tell
me about how your firm first became an investor in
ASCOM and why you sort of hung in there over
the years.
Speaker 5 (28:21):
I think it's important to remember that from a South
African debt perspective, the overwhelming majority actually of escom's debate
is government guaranteed. And so what that means is that
ESCOM takes on the debt, but there's a government backstop.
So to the extent ESCOM is unable to pay on
a scheduled coupon or principal date, the government will step
in and meet that payment. So the credit risk of
(28:42):
ESCOMB is a little bit I don't want to use
the word less important, but it's standalone credit is very weak, absolutely,
but it is buttressed by a government guarantee. And so
the bulk of the South African debt, or that the
issues in South African rand is government guaranteed, and so investors,
there's a lens that one can look at ESCOM as
being almost a department of government. So instead of buying
(29:03):
government bonds, you then buy an s COM bond, which
comes at a significant yield enhancement relative to government bond.
Speaker 1 (29:11):
It's almost a chicken and an egg thing, right, because
SCOM can't thrive without economic growth, and the economy can't
thrive unless SCOM is thriving. Okay, So if there is
this what's the wordy sort of the yin and yang
relationship between the economy and Escom, they both need one
another essentially, And the problems facing s COM are both
(29:33):
its own financial management, its corporate management, and then the
nature of the beast itself. It needs to modernize, It
has outdated power plants, it's taking some plants offline. The
company is trying to break itself up, or I guess
it's already is broken up now into three different parts, generation, transmission,
and distribution. How do you see a good manager of
(29:57):
s COM making ASCOM a more thriving and vital company
than it.
Speaker 4 (30:03):
Is right now?
Speaker 1 (30:04):
Wow? How long do you have get going? But think
if you could wave your magic wand across as Com
and everything would change tomorrow, what would it look like
tomorrow compared to what it looks like today?
Speaker 5 (30:19):
So I think when you look at this, you can
look at it at two levels. One is what can
Escom itself and management at ESCOM do? And two what
must the shareholder be doing? Because some of the actions
that are needed are arguably not in escom's domain. So
let me break that down for you. You spoke earlier about
ESCOM being separated into generation, transmission and distribution. Generation is
(30:41):
where the power gets made. The cal fight plants. Currently
es COM's overwhelming fleet at the moment is cal fired plants.
One of the purposes of deregulating and splitting ESCOM up
into three is to open up the generation market and
to allow for other people, not necessarily ESCOM, to.
Speaker 4 (30:56):
Produce the power.
Speaker 5 (30:58):
And that's actually the government policy that has been rather successful,
arguably could have been more successful. And what I'm talking
about here is the Renewable Energy Independent Power Program, where
government asked for solar and wind and other renewable energy
source producers to put up wind farms and solar farms,
and ESCOM would buy or does buy that energy from
(31:19):
those power producers, and that energy gets fed into the grid.
Speaker 1 (31:22):
But let me interrupt you from it on that point.
One of the hurdles there, however, is that solar and
wind will only provide a small portion of the country's
energy needs right now. We're talking maybe a decade or
more from now where that actually becomes a meaningful replacement
from electricity that is generated by coal fired plants. Is
that correct or correct me if I'm wrong, Well, I.
Speaker 5 (31:44):
Think it depends the pace at which one executes on
the renewable energy program. So if we go back, the
renewable energy program really started at about twenty eleven twenty twelve,
so it's been ten years in the making, and the
way the plan was meant to work, they were arguably
meant to have been very many more megawatts added to
the grid than have current been added.
Speaker 4 (32:01):
So currently there've been six.
Speaker 5 (32:03):
Thousand megawatts of new energy added to the grid from
the renewable energy sources. That could have been a lot
more had the program been accelerated, had it not been
deliberately we think stalled in the kind of height of
state capture years the twenty fifteen twenty sixteen years, and
so yes, it is currently a small portion, but it
(32:24):
could be a very big portion. We've got abundant solar resources,
we've got abundant wind resources, and if you place them
in the right places over the country, they can become
a significant source of power. At the moment, the hurdle
to that is the transmission grid. So in theory, one
could add infinite amounts of solar and wind energy. But
the practical roadblock one's going to come up against is
(32:45):
actually plugging. I kind of think of it as plugging,
plugging that into the grid so those electrons can move
to my home and yours.
Speaker 1 (32:52):
And when we talk about transmission, we're essentially talking about wires,
wires from the generators to transformers and then into people's homes.
So I guess the fact that the organization and implementation
of the transmission plan just sitting on the minister's desk
suggests that the minister doesn't care if people's food is
riding in their fridge or that the kids can't do
(33:14):
their homework at night. Why isn't there a greater sense
of urgency on the part of the government to address
this foundational and substantial problem.
Speaker 4 (33:25):
I can't speak for the minister.
Speaker 5 (33:27):
I think that the points that are made from the
government side is that they are addressing it was urgency.
They've established multiple task forces and teams, and there's various
interventions at interministerial level that are looking at this problem.
And so there is a plan. There's a plan that
was released in July last year which is to address
the electricity.
Speaker 4 (33:48):
So there is arguably a plan.
Speaker 5 (33:50):
I think the question comes into are the interventions enough.
Is the timing of the intervention urgent enough?
Speaker 1 (33:58):
So from your perspective, they are moving with some alacrity
around this. It's not just stuck in the bureaucracy, and
it's not just people passing it down the line and
not getting the job done. There are meaningful steps being
taken to sort this out.
Speaker 5 (34:12):
Yes, I know, I think there are meaningful steps. I
think the urgency of the crisis is finally being highlighted.
I think what's concerning I guess for us is that
the lam bell has been rung on ESCOM for quite
some years now. So we knew way back in the
mid two thousands that we would run out of generation capacity.
Not a lot was expedited to address that problem. We've
(34:33):
known for quite some time that escom's debt was at
an unsustainable level. That's only been started to address as
of February with the Finance Minister's announcement in the budget
of the debt relief this year. You know, we've known
about the need for unbundling. In fact, unbundling has been
part of I think es COM's white paper as far
back as the late.
Speaker 4 (34:50):
Nineties to unbundle ESCOM.
Speaker 5 (34:52):
It's been part of the plan, but the action is
kind of happening at the you know, really when the
emergency becomes very dire, and so I guess the question
what we would have is in terms of the forward
looking view and what needs to be done crisis management
and applying the right attention and speed to decisions in
a crisis, Yes, that is important, but what is also
important is the looking forward and being able to plan
(35:15):
to avert a crisis so that we can take steps
today and tomorrow and this year and next year. And
using the transmission grid as an example, we know we
need investment in the transmission grid. We know these projects
take a long time anyway, they take between seven to
ten years to get them up and going. So let's
start now with that, and let's not wait for a crisis.
I think that's the challenge that we find is that
(35:37):
crisis management sometimes doesn't lead to optimal outcomes, and it
can What.
Speaker 1 (35:42):
Am I trying to say, You're trying to say that
sometimes it takes COVID nineteen for people to make good
public health decisions that they've been putting off for a
long time, and then they wait till the crisis arrives
before they take measures they might have taken years before.
And perhaps you're saying right now that South Africa has
an existential power generation crisis, and maybe it's taking a
(36:06):
crisis to force both the government and the private sector
to take the steps needed to resolve the problem.
Speaker 4 (36:13):
Yes, I think that's right.
Speaker 5 (36:14):
I think also the nature of the crisis and the
length of time it's taken us to get here, the
interventions need to be so much greater, and they need
to be done with utmost speed and precision. And I
think part of the challenge also is there can be
a tendency to wait for the perfect plan and to
formulate the perfect plan, And perhaps what might be needed
(36:37):
is a little bit more nimbleness in adapting to a
plan and to start executing and adapting as circumstances change.
So it might be that you try one thing but
it doesn't necessarily work. You can tweak it here, or
they're much better to do that at least there's some
food momentum that creates energy of its own accord upon
the pun. But yeah, so I think a certain level
of nimbleness and adaptability is also probably needed. What we've
(36:59):
been very good at, I think is diagnosing the problem,
identifying the problem, solving for the problem in a plan,
on a document, on a PowerPoint, at presentations, et cetera.
Where we've been less adaptable, I guess is in the
execution of the plan and in really sometimes making some
of the hard trade offs that are needed in executing
a plan. We're never going to make everybody happy all
of the time, and I think that's maybe the benefit
(37:21):
of a crisis is it does focus one's attention very
laser like on the immediate problem, which is the lack
of generation capacity that we have right now, and solving
load shedding, which is going to take years. It's not
a tomorrow solution.
Speaker 1 (37:35):
You're hanging in there as a debt holder. You're not abandoning.
Shep What are you optimistic about and what are you
pessimistic about when you look at the landscape right now?
Speaker 4 (37:45):
So I guess.
Speaker 5 (37:45):
Look, I'm a bond investor, and so we live in
the world of fear and on the world of hope.
So I'm much better at answering what I'm pessimistic about
than what I'm hopeful about.
Speaker 4 (37:55):
But let me try.
Speaker 5 (37:56):
So I think I think what we're seeing now is
the elevation of the crisis. It is receiving attention at
the very highest levels. That is a good thing. And
I think the link I guess between COM's the solving
of escom's problems and the solving our economic growth problems,
that is very clear. We've seen it in the numbers,
and so that is providing a level of clarity I
(38:18):
think to some of the decisions that are being made,
and so I think that's.
Speaker 4 (38:21):
All very good.
Speaker 5 (38:22):
I'm also very encouraged by and it comes out in
different forums, but certainly the increasing tilt to renewables are
moved to cleaner energy, you know, just energy transition. These
things are all important for us to manage as in economy,
actually as a planet we need to do. This is
one of the biggest emitters. And so the tilt to renewables,
the tilt to cleaner forms of energy is something I'm
(38:44):
personally and certainly Future Growth is very encouraging of and
very optimistic about. It is actually the solution to our
energy problems. So all of that very optimistic about. I
guess where I get pessimistic is in the lack of
the hard decisions that are needed to be made. And
I think where I get pessimistic is in the magnitude
(39:05):
of the problem. And so while it may have been
and one you know, can't look back, one must look forward.
Might have been few interventions a few years ago, the
magnitude of those interventions are so much bigger now, and
I think the challenge lies a lot in who actually
is responsible for delivering on the solutions. What we not
(39:26):
always clear on is what are the priorities. Does everybody
agree on the priorities and on the implementation of those priorities,
I think we can get a little bit muddled. One
department might have particular priorities that might not necessarily be
shared by another department.
Speaker 1 (39:40):
It sounds like South Africa needs and energies are given
the real authority to implement radical, speedy and thoughtful decisions.
Speaker 5 (39:51):
Well arguably that's the purpose of the new Electricity Minister
that was appointed by the President a few months ago, and.
Speaker 4 (39:57):
Again it's a part solution.
Speaker 5 (40:00):
His powers were only determined a week ago, I think,
And so given the urgency of the crisis, this was
announced in February, if I recall, and so two or
three months have gone by without the minister himself actually
knowing what his powers are to be. And so I
think that's the challenge, is that we know what needs
to be done, we kind of put a little plaster
(40:22):
on it and wait a few months, and then put
another little plaster on it and then wait a few months.
Speaker 4 (40:27):
And that's not really a way to address a crisis.
Speaker 1 (40:30):
We don't let people escape the show. I'll go without
sharing what they've learned. Crash courses about learning moments. So
you have been watchingscom for years, You've been watching this
problem for years. What do you know now that you
didn't know when you first began overseeing your investments in
as COOM.
Speaker 4 (40:51):
That's a very interesting question, Tim.
Speaker 5 (40:53):
So I think what is reinforced I guess for us,
certainly as investors, is that non financial risk factors, So
the ESG, environmental, social and governance risk factors are becoming
buzzwords now, but they actually translate into very real financial
impact and financial loss, and so you don't see it immediately.
And certainly in twenty sixteen, s COM's financial state was
(41:13):
not great, but it definitely wasn't what it is now,
which is way worse.
Speaker 4 (41:16):
And so I think that the real.
Speaker 5 (41:17):
Lesson has been that not paying attention to those non
financial factors, and the environment is another one, by the way,
the environmental costs and has a big role to play
in solving that for us as a country as well.
Not paying attention to those non financial risks do actually
translate into hard income statement, balance sheet and cash flow impact,
negative impact over time. And so I think the lesson,
(41:40):
certainly from an investment point of view, is that yes,
numbers must stuck up, but if you're going to be
taking and that is what we are asked to do,
is to take a forward looking view on a company
in this case es COM, one has to factor in
those elements, and particularly on the governance side, is to
look at, well, how's the company being run? Are the
right people in place, are they making the right decisions
and the best interest of the company. How's internal control
(42:02):
framework stacking up? How is risk being managed within the entity?
You know, all these seemingly boring questions but actually have
real financial impact that outlive I guess, political cycles, outlive
management contracts, outlive boards, tenure, and so there is very
much a need to focus on that if we are
going to be investing sustainably into the future with all
(42:25):
the risks that we are facing.
Speaker 2 (42:27):
Algo, we've run out of time.
Speaker 1 (42:28):
I wish I had more time with you. Thank you
for joining us today.
Speaker 4 (42:32):
Thank you Tim, and thank you very much for having
me on the show.
Speaker 1 (42:35):
Olga Contentatos is the head of credit at Future Growth
Asset Management. You can find her on Twitter at olg
so five two. Paul Burkhart, who also joined us today,
is a reporter with the Bloomberg News. You can read
his work on Bloomberg's website, the Bloomberg Terminal and on
Twitter at p Burkhart. Here at crash Course, we believe
(43:00):
that collisions can be messy, impressive, challenging, surprising and always instructive.
In today's Crash Course, I learned that all of the
horrors facing South Africa because it doesn't have reliable electricity
generation may be visited in other countries as well that
don't pay attention to how South Africa got here? What
(43:24):
did you learn? We'd love to hear from you. You
can tweet at the Bloomberg Opinion handle at Opinion or
me at Tim O'Brien using the hashtag Bloomberg Crash Course.
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show. This episode was produced by the
indispensable Anamasarakas, Moses Ondam and Me. Our supervising producer is
(43:49):
Magnets Henrickson, and we had editing help from Sagebauman, Katie Boys,
Jeff Grocott, Mike Nize and Christine Vanden Bilart. Blake Naples
does our sound engineering and an original theme song was
composed by Luis Gera. I'm Tim O'Brien. We'll be back
next week with another crash course.
Welcome to Crash Course, a podcast about business, political, and
social disruption and what we can learn from it. I'm
Tim O'Brien. Today's Crash Course. What happens when the lights
go out? We all take for granted that nifty little
miracle that happens when we flip a switch on our
walls or lamps, the lights go on. Electricity is a
(00:22):
modern marvel. It's the juice that fuels most so what
people mean when they talk about civilization. Roads are illuminated,
Kids can do their homework at night, food gets preserved
in the fridge, Computers boot up, elevators move, et cetera,
et cetera. Coal fired power plants also have a major
downside pollution and environmental degradation. When we lose access to electricity,
(00:47):
we feel the pain immediately. What we're used to doing
collides with what we can suddenly not do. Millions of
people in Texas lost power for days when the grid
there sees In early twenty twenty one, Puerto Rico went
through weeks and then months of rolling blackouts following devastating
hurricanes several years ago. Now, consider South Africa, the second
(01:09):
largest economy on the African continent. And home to sixty
one million people. The entire country has faced rolling blackouts
for about fifteen years. How can that be?
Speaker 2 (01:20):
Then?
Speaker 1 (01:20):
What is the present and future hold for a country
that doesn't have a reliable source of electricity? I'm in
South Africa. Then, joining me to discuss all of this
is Paul Burkhart, an energy reporter with Bloomberg News in
Cape Town, and Olga Constantatos, the South African investor who
has spent years watching the power crisis escalate in her country. Paul,
let's start with you. Thanks for joining us.
Speaker 2 (01:42):
Thank you.
Speaker 1 (01:43):
So let's just start with a little background for everybody
out there who takes electricity for granted but actually doesn't
know how electricity is produced. Give us a little primer
about how the jew sends up in the wires.
Speaker 3 (01:56):
Sure, and I'll use the South African example. Basically, South
Africa is very rich in coal, so they saw coal
is really the optimal fuel and what they do is
the mine the coal that goes straight into the power plant.
They built the power plants right next to the coal
mines basically, so they have conveyors that end up running
(02:17):
for miles as they mine more and more of the coal.
Out the coal, it's pulverized and then it's burned in
the boiler. That heats up the steam that powers the
turbine which powers the generator, and that turns into electricity
and then it goes through the transmission network. And in
South Africa, the coal rich area is far away from
(02:40):
some of the other population centers, so the transmission lines
run very far in some cases.
Speaker 1 (02:46):
Yeah, and the electricity goes through the wire, then gets
transformed and ends up in businesses, are in people's homes,
and in South Africa in particular, all of that essentially
runs around one company called ESCOM, or the Electricity Supply Commission.
Tell me a little bit about SCOM, this company that
(03:08):
occupies a monumental and fundamental position in South African life.
Speaker 3 (03:15):
ESCOM is, well, it's one hundred years old this year.
And really it came about with the mines in South Africa.
Obviously needed power to extract the mineral resources here, so
that was really the need for it. And then as
it rose, it was basically a monopoly. It was a
state owned monopoly, and later on really industrialized the country
(03:39):
even through apartheid, and so South Africa needed to be
self sufficient in terms of electricity production, fuel production, and
so ESCOM was one of the really the pillars I
guess of how it achieved that.
Speaker 1 (03:54):
And sort of a trophy enterprise and state owned, which
meant it produced electricity pretty much cost So for South
Africans who had access to that electricity, they were getting
a really cheap way to electrify their homes and businesses.
But you've also mentioned that it's a state owned enterprise,
and inevitably companies that are state owned, their affairs and
(04:17):
their business gets mingled with politics and what does that
meant for ESCOM.
Speaker 2 (04:21):
It complicates things quite a bit.
Speaker 3 (04:23):
And it's funny because if you sometimes if you go
to ESCOM and you ask about something, they say, oh,
that's really a question for the government. And sometimes if
you go to the government shareholder, which is the ministry
in charge of ESCOM is the Department of Public Enterprises,
if you ask them things about ESCOM, sometimes they'll say, oh,
that's an ESCOM board question, or that's really for the utility.
(04:46):
We don't deal with that. But there is a very
close relationship between the two and I think that's been
an issue for the leadership of ESCOM sometimes and how
it runs the company because it really does need to
do it in a way that's approved by government ultimately.
Speaker 1 (05:03):
Another thing that's interesting to me about scom's history is
electricity is a precious resource. It powers a society, and
when ESCOM first came into being, it only had to
provide electricity to about ten percent of the South African population,
and then the businesses that population controlled mining and other businesses,
(05:25):
which meant that ninety percent of South Africans, a significant
portion of whom we're black, had no access to electricity.
And over the last century, as apartheid ended, as ESCOM evolved,
as the South African economy evolved, one of the missions
for ESCOM came to be providing electricity and power to
(05:47):
one hundred percent of the population, but from a company
whose origins were only having to provide electricity to ten
percent of the population, So it had this mission to
give everyone access to power, but had never really been
built for that mission. Do you see that as almost
like a deterministic or faded at birth kind of problem
(06:09):
baked into it that because of apartheid, ESCOM wasn't built
properly to fulfill the mission people are demanding of it today.
Speaker 3 (06:18):
Well, there are a couple different parts to that. Certainly,
the domestic demand I think went up quite a bit,
and then electricity is actually a right in South Africa,
so that became very important. But on the other hand,
the democratically elected government since nineteen ninety four, there were
some bumps in the road in terms of policy, and
(06:39):
that includes building more capacity for ESCAM, and I think
it was known that they were going to need more
with supplying more power to residential areas and also just
with economic growth for the country, they were going to
need more power capacity and there were a lot of
stumbles there and there are a lot of miss aps.
(07:00):
And for example, to the biggest power stations that ESCOM
has built and still being finished, they were behind schedule,
They've become overbudget, they've been delayed by corruption, by labor strikes,
just a number of different things that sometimes even have
included bigger companies that we would recognize like ABB McKenzie.
(07:25):
That's all been part of some of the recent history.
And so there were just a series of mishaps that
didn't bring on the extra power when it was supposed to,
and that's one of the reasons that ESCOM is in
this situation.
Speaker 2 (07:39):
It's in right now.
Speaker 1 (07:41):
You said an interesting thing a moment ago, when you
were explaining all this to me, you said that access
to electricity is a right in South Africa. Let's talk
a little bit more about that. Access to electricity was
baked into the legal code. No one could be denied
in theory or according to the law, access to electricity.
Why did that get enshrined as such?
Speaker 3 (08:04):
Well, I think that in South Africa, especially after ninety four.
Obviously South Africa has a very robust constitution.
Speaker 1 (08:14):
And ninety four, for our readers, that's when Nelson Mandela
comes to power, the great hero of both the pre
and post apartheid eras the man who sort of bridged
Africa's troubled, sordid grotesque passed and some of the hopes
of its future. That era was full of promise in
nineteen ninety four, and of course es COM and electricity
(08:35):
were part of a vision for hope and change.
Speaker 3 (08:38):
That's right, and then the party, the African National Congress
that came to power. With the rise of the African
National Congress, there was also the hope and the promise
that things were going to change for everyone, that services
were going to change for everyone, whether it's sanitation, transportation
and electricity, and so there's been an increase in electrification
(09:02):
rates like of the nation.
Speaker 2 (09:04):
But the process isn't done yet.
Speaker 3 (09:06):
But that was just seen as something that needed to
be really in the quest for equality, especially now that
there's a democratic government in place, that should be expected
and it's actually a right for people to have that.
Speaker 1 (09:20):
And I don't think anyone would disagree that a hallmark
of a civilized society is that people have access to
the power they need to improve their standard of living
and increase their access to opportunities. The tricky thing when
we look at the history of s COM is that
that's all entwined with both human nature and human frailty
(09:42):
and the difficulty that any big complex company composed to
people managing it effectively wherever the country is, whoever's running it.
But over time in South Africa, s COM really became
many things. A piggy bank for the people who can
rolled it, an influenced machine, patronage for jobs for people
(10:04):
connected to the party in power, a source of hope
if managed well. But we now know, given what's happened
for over a decade here, that it is mismanaged and
it is not modernizing and it's not fulfilling the promise
of actually giving reliable energy generation to every South African
(10:25):
How did we get there? Why has ESCOM become this
slow motion car crash.
Speaker 3 (10:31):
There are a few things that have proved to be
troublesome for ESCOM and the government for that matter, and
one is making decisions when they need to make them.
So actually building the extra capacity that was one issue,
and that was delayed, and then when it did happen,
there was no EPC basically a contractor that would oversee
(10:53):
the other contractors. ESCOM wanted to do it itself as
kind of a project that could show the world that
it could build these massive power stations, the biggest in
the world currently, and it just didn't go well. And
there was also the graft was starting to show up
at that point, and labor issues and a number of
(11:13):
other things. Certainly corruption is something that you could find
even back in the apartheid era with some of the
contracts there how those operated, but it did get much
worse in terms of just the scale of it.
Speaker 2 (11:28):
On one hand, I.
Speaker 1 (11:30):
Want to take a break right there, Paul here from
one of our sponsors, and we'll come back and continue
this fascinating conversation. We're back with Paul Burkhart, a Bloomberg
News reporter, and we're talking about South Africa's electricity nightmare. Paul,
let's discuss what it means on a day to day
basis when people don't have access to electricity, businesses, homes.
(11:56):
What are the ramifications of not having a reliable energy source,
both for people themselves and for an economy.
Speaker 3 (12:04):
Yeah, for one thing, I got home yesterday and the
lights went out. Load shedding started, which is what South
Africans call these power cuts.
Speaker 1 (12:13):
They call it load shedding. Where does the term load
shedding come from? That? Basically, the company itself is finding
ways to slough off some of the demands that are
on it to generate electricity so the grid doesn't get overwhelmed, right.
Speaker 2 (12:27):
That's exactly it.
Speaker 3 (12:28):
It's designed to prevent a total collapse of the grid.
So you know the frequency of the electricity can't drop
to a certain level, so they want to cut off
that demand from certain areas. And here they rotate it
regionally and it'll be in different stages. So each stage
is one thousand megawatts, So stage one, Stage two we've
(12:50):
been at stage six quite a bit.
Speaker 2 (12:52):
They try to schedule it.
Speaker 3 (12:53):
But sometimes it comes up quickly. They can't always do that,
and it really depends on the performance of the power stations,
and because they're underperforming and they've become so unreliable, it
happens quite often. And so yesterday when I came home
and it was just about time to make dinner and
the lights went off. So that's a very simple way.
The traffic lights don't work, and then sometimes when the
(13:16):
power comes back on again, they still don't work. So
all the electronic items in your house and your appliances
and the things that stay on normally when they're turned
on and off too much and they weren't designed to
do that, eventually they're going to break a lot faster
than if it was just normal use. I noticed my
laptop batteries really on the fritz now, So that's another example.
(13:40):
But on a much more serious side of the scale,
we've seen it start to creep into water supply and
sewage treatment. Where the electricity goes off, the pumps don't
work if there's not a backup, then you know, in
terms of providing water supply, they can't get pumped up
to the water can't get pumped up to higher lying area.
(14:02):
But in terms of sewage, obviously here in Cape Town
they've closed some of the beaches in the last tourist
season because there was raw sewage going into the water.
So that's a problem and obviously very scary, and recently
with some cholera outbreaks in the country, than the prospect
of things getting worse, it's there.
Speaker 2 (14:21):
It's very close.
Speaker 3 (14:22):
And in terms of food production too, I think it's
also has been interesting when a slaughterhouse loses power, it
can't slaughter food, so you get a backup of chickens
or whatever, a.
Speaker 1 (14:36):
Backup of rotting chickens if they've been slaughtered.
Speaker 3 (14:39):
Yeah, and which you have to do something with at
some point. And it just the whole supply chain. Even
in the grocery store, the food on the shelves sometimes
there isn't as much of because all through the process
from the farm to the grocery store, the refrigeration, if
the power goes out and there isn't a backup, then
(14:59):
your food.
Speaker 2 (14:59):
Is not going to last as long.
Speaker 3 (15:00):
Then when it makes it into your refrigerator and the
power goes out quite a bit, you know, you don't
want to eat chicken. That's been thought a few times,
so it really creates a lot of health issues too.
Speaker 1 (15:11):
And speaking of health issues, hospitals themselves rely on electricity
generation in order to treat patients, to examine people, to
house them safely when they're ill, So the hospital network
gets threatened. And then what happens on dark streets more crime,
So those are issues as well. The crime rate has
been rising in already crime ridden neighborhoods around Cape Town
(15:33):
and in other cities around South Africa. Are there any
other ramifications that are front of mind for you when
people are deprived of electricity?
Speaker 3 (15:42):
Certainly, the prospect of social unrest is something that everyone
is aware of because there are already demonstrations quite a
bit in a lot of areas in South Africa where
really any services haven't been delivered to a satisfactory degree,
so people protest in the streets. And this would mean
without power and without it for an extended period of time,
(16:05):
that would create even more of that type of activity.
Speaker 2 (16:08):
But what you're.
Speaker 3 (16:09):
Seeing is even insurance policies have been rewritten to exclude
periods of load shedding, and the prospect of that is
also really scary. Because what are people going to do
if they're not going to be able to claim insurance
on things that are taken or destroyed or whatever happens
when the lights do go out. So we're on the
(16:30):
verge of something that could get much.
Speaker 1 (16:32):
Worse, something that could get worse, much worse in terms
of a failed state or just a mounting series of
social problems that people are going to be challenged to
deal with.
Speaker 3 (16:43):
Yeah, I think primarily just the obstacles that people have
to deal with and just growing unrest really and the
fact that if these power cuts deepen even more and
you know, there's room for them to before there would
be a total collapse, it's just going to mean businesses
are shown for longer, and especially in lower income areas
like townships. They've found that two thirds of the businesses
(17:07):
have had to lay people off because of load shedding,
specifically because they just can't keep those businesses running and
so they're not able to make enough money. And we
see a lot of that. So if you take everything together,
then it's just it ruins business and it really makes
it impossible kind of to get through the day. And
I think eventually just that anger rises and doesn't turn
(17:29):
into anything good.
Speaker 1 (17:31):
One avenue for turning that around would be just to
effectively manage s COM itself, modernize the grid, get it
ready for a new era, help with green energy transitions.
But s COM has been sort of riddled at times
with almost tragic, comically crazy circumstances. You and I were
talking recently together about one of the former CEOs claims
(17:53):
he was poisoned. He was trying to clean He says,
s come up and get it on a new track,
and he became subject of threats. He eventually fled the country.
He got the job after literally I think two dozen
other people turned it down. In an environment like that,
where corruption is rampant, where change has resisted to the
(18:14):
point of threatening people with death or violence, it doesn't
bode well for getting management into ESCOM that is capable
and willing to turn things around.
Speaker 2 (18:25):
Yeah, it's difficult.
Speaker 3 (18:26):
I think some people who work at ESCOM feel like
it's their patriotic duty.
Speaker 2 (18:30):
I think that's what keeps them going.
Speaker 3 (18:32):
So I think there are a lot of things to
be hopeful about in terms of leadership and people wanting
to do the right thing, and especially a lot of
the workers within escammun there are thirty eight thousand employees there,
so surely most of them have to go to work,
you know, believing that they're doing good for the country
(18:53):
and that they want to turn this around. But obviously
there's a search for a CEO right now, and it's
hard to imagine who would want to take that job,
but I'm sure they'll find someone and then they will
have to face the same issues in terms of really
their relationship with government and how they get things through.
And there are so many different figures that participate in
(19:18):
trying to fix the problem that that becomes a problem
in and of itself.
Speaker 2 (19:22):
Sometimes.
Speaker 1 (19:23):
How do you think when you look down the road,
how do you think this problem gets sorted? What is
the solution.
Speaker 3 (19:29):
One positive thing that we're seeing is certainly there's encouragement
now even by ESCOM, which hadn't been well. It was
only in the recent past really that they were trying
to bring in private companies to generate more power as
COM typically and there's still a large faction in South
Africa that would want ESCOM to survive as a behemoth
(19:51):
and you know, a state owned company. But there's certainly
the door has opened really out of necessity to bring
in more private production, so that will work. That's rising,
and that will work, it's just a matter of time.
And the problem is that most of the population will
remain disenfranchised by that. If COM's prices are going up
(20:12):
for electricity and private power is supplying private business, or
you're building it if you can, or you're building it
if you can afford it as a business or as
a resident, it still leaves out the majority of the
population that have to rely on ESCOM. So that's where
the real variable is, and that's where they really need
(20:33):
to come up with the solution and really get on
the ball with a lot of initiatives that they've had
in terms of building more renewables, just bringing in other
power because the cost of blackouts is so great that
in almost every case it's going to be cheaper just
to bring in even the most expensive power supply you can.
Speaker 1 (20:56):
And of course businesses and more affluent residents have the
option of getting their own generators or buying power from
other resources. Low income people don't have those options, So,
as you noted, it simply further deepens these income and
social chasms that divide the population. You know, Paul I
always like to ask people during the show what have
(21:17):
they learned from a collision that we're talking about.
Speaker 2 (21:21):
What do you know now.
Speaker 1 (21:23):
About either the value of electricity or the importance of
SCOM in South African society that you didn't know those
many many years ago before you started covering energy and
SCOM so closely.
Speaker 3 (21:38):
Well, what's kind of funny is you could probably ask
just about anyone on the street. We could walk out
of this building and ask just about anybody about ESCOM
and they'd be able to tell you all about capacity,
energy availability factor, a lot of technical things. Everyone in
this country knows what's happening with the power system. So
(21:58):
everyone here has learned a lot. And I've certainly learned
just some of the technical things about transmission grids, for example.
Speaker 2 (22:06):
In bringing in more renewable energy.
Speaker 3 (22:09):
One of the issues that South Africa has faced is
they don't have enough room on the grid in the
most optimal parts for sun and wind, and so that
filled up. And you see these issues coming up in
other countries, in western countries, but you see them here first.
So if you want to look at a place where
(22:30):
the extreme has been reached, then you can look at
this model. And so I think I've realized just a
lot of the shortcomings of you know, even if you're
looking at clean energy, which is really positive development, it
has its limits that you have to admit and that
you only build so fast or you can only you know,
(22:50):
use during certain periods, and the reality of that I
think comes up here quite a bit.
Speaker 1 (22:57):
Paul, We're going to take a break and then I'm
going to bring another to board to talk about SCOM
and South Africa's power problem. But thank you for joining
us today.
Speaker 2 (23:04):
Thanks very much. It was great.
Speaker 1 (23:11):
We're back and we're joined by Olga Constantatos, an investor
with Future Growth Asset Management in Cape Town. Olga, we've
been talking about South Africa's years long struggle to provide
its residents and businesses with electricity, and I wanted you
to join us for two reasons. One you're the go
to person when people try to divine the future of
(23:31):
South Africa's power company s COM, and two you have
skin in the game. Your firm owns a big chunk
for the company's debt. Thanks for joining us today.
Speaker 4 (23:42):
Thank you Tim, Thanks for having me.
Speaker 1 (23:43):
You know, I'm fascinated by es COM because it's not
just a company story or even the story of one
country struggle to provide electricity. It's about economic development and
how states and businesses improve everyone's standard of living. And
that's really not happening right now Africa.
Speaker 2 (24:00):
Is it.
Speaker 4 (24:01):
Well.
Speaker 5 (24:02):
No, the rolling blackouts that you mentioned at the beginning,
since two thousand and seven, and it's been on an
off it hasn't been a permanent feature, have really impacted citizens' lives,
have impacted businesses, have impacted economic growth in our country,
and certainly the escalation of load shedding in more recent
history has very negatively impacted our future, our outlook, and
(24:23):
really everything about the economy. Escom's problems are intertwined with
the country's problems, and so solving ESCOM really puts us
on a much more sustainable path to economic growth and prosperity,
which we as a country desperately need.
Speaker 1 (24:37):
And is that a problem in your mind? That is
there a solution available to the problem the country faces
when it's single its only electricity generator is so deeply troubled.
Speaker 4 (24:52):
I think yes.
Speaker 5 (24:53):
The solution to escom's problems doesn't lie with one particular
intervention or one particular solution. Solutions of multifaceted the problems
are multifaceted. So escom's problems didn't start last week or
last year. They started a good few years ago. And
so the solutions to ESCOM lie in cost reflective tariffs,
They lie in addressing its unsustainable debt burden that it holds.
(25:16):
It lies in fixing the very high and unsustainable cost
base and addressing some of the corruption, maladministration, Malfieson's misspending,
all of that.
Speaker 1 (25:28):
So so far you've given me four things and they
all sound huge. Right, So when you talk about tariffs
for the outside listener, you're talking about price increases to.
Speaker 4 (25:36):
Users, right exactly, that's correct.
Speaker 1 (25:38):
Have there been massive price increases passed along to businesses
and residents in the country for years, so they have.
Speaker 5 (25:46):
The rate of increase of Escom's tariffs have increased beyond
what inflation has increased. I think the problem with ESCOM
is that it's in a classic utility death spiral. So
the tariffs, even though they have been increasing, are not
enough to cover.
Speaker 4 (26:00):
But it's very high cost base.
Speaker 5 (26:02):
So the tariff's are one part of the equation, but
addressing the very high cost base also needs to happen,
and that hasn't happened.
Speaker 1 (26:08):
You said the scary term death spiral. Do you think
of that as a financial death spiral? In other words,
the company is saddled with so much debt and the
coupons it's paying out on that debt relative to the
amount of revenue it's bringing in, and there are no
easily replenishable or other sources of revenue that can make
(26:28):
up for that debt burden that it's saddled with. Is
that when you use the term death spiral, is that
what you're referring to.
Speaker 5 (26:34):
So there's a death spiral at Escom, the utility death spiral,
and a debt spiral.
Speaker 4 (26:39):
So let's unpack it. The utility death spiral is what
you talk about.
Speaker 5 (26:43):
Where the revenues are increasing, it then means that users
then decide they want to go for less expensive alternatives,
so they then remove themselves from the grid or they
reduce their consumption from Escom. So as the tariffs go up,
so more people are parting from Escom making other alternatives,
and that means then that you need to recover your
(27:06):
costs from a smaller user base, which means higher and
higher tariffs.
Speaker 4 (27:10):
And it becomes the spiral.
Speaker 5 (27:11):
As the tariffs get even higher than more people then
those that can find alternatives, You then have to recover
the cost base from a smaller pool each time.
Speaker 4 (27:20):
That's the utility death spiral.
Speaker 5 (27:22):
The debt spiral is similar but different in that ESCOM
isn't generating enough cash flow to service its debt, and
so the capital structure of ESCOM is just not fit
for purpose, and so it is unable to service its
debt meet its debt obligations without significant intervention from its shareholder.
Speaker 4 (27:39):
That's the debt spiral. So it's the two together.
Speaker 1 (27:42):
And I have to think to myself, what's a nice
woman like you doing in a place like this, because
you own some of that debt and you're shrewd, you're smart,
you're informed, you're experienced, you've been around the block, and
you're hanging in there as a debt holder and as
someone who is much less sophisticated than you are about
these things. And I don't know the history of the
(28:03):
company as well as you do. I'm not familiar with
the management, and I'm sure you're steeped in an understanding
of the management there. Why are you hanging in Tell
me about how your firm first became an investor in
ASCOM and why you sort of hung in there over
the years.
Speaker 5 (28:21):
I think it's important to remember that from a South
African debt perspective, the overwhelming majority actually of escom's debate
is government guaranteed. And so what that means is that
ESCOM takes on the debt, but there's a government backstop.
So to the extent ESCOM is unable to pay on
a scheduled coupon or principal date, the government will step
in and meet that payment. So the credit risk of
(28:42):
ESCOMB is a little bit I don't want to use
the word less important, but it's standalone credit is very weak, absolutely,
but it is buttressed by a government guarantee. And so
the bulk of the South African debt, or that the
issues in South African rand is government guaranteed, and so investors,
there's a lens that one can look at ESCOM as
being almost a department of government. So instead of buying
(29:03):
government bonds, you then buy an s COM bond, which
comes at a significant yield enhancement relative to government bond.
Speaker 1 (29:11):
It's almost a chicken and an egg thing, right, because
SCOM can't thrive without economic growth, and the economy can't
thrive unless SCOM is thriving. Okay, So if there is
this what's the wordy sort of the yin and yang
relationship between the economy and Escom, they both need one
another essentially, And the problems facing s COM are both
(29:33):
its own financial management, its corporate management, and then the
nature of the beast itself. It needs to modernize, It
has outdated power plants, it's taking some plants offline. The
company is trying to break itself up, or I guess
it's already is broken up now into three different parts, generation, transmission,
and distribution. How do you see a good manager of
(29:57):
s COM making ASCOM a more thriving and vital company
than it.
Speaker 4 (30:03):
Is right now?
Speaker 1 (30:04):
Wow? How long do you have get going? But think
if you could wave your magic wand across as Com
and everything would change tomorrow, what would it look like
tomorrow compared to what it looks like today?
Speaker 5 (30:19):
So I think when you look at this, you can
look at it at two levels. One is what can
Escom itself and management at ESCOM do? And two what
must the shareholder be doing? Because some of the actions
that are needed are arguably not in escom's domain. So
let me break that down for you. You spoke earlier about
ESCOM being separated into generation, transmission and distribution. Generation is
(30:41):
where the power gets made. The cal fight plants. Currently
es COM's overwhelming fleet at the moment is cal fired plants.
One of the purposes of deregulating and splitting ESCOM up
into three is to open up the generation market and
to allow for other people, not necessarily ESCOM, to.
Speaker 4 (30:56):
Produce the power.
Speaker 5 (30:58):
And that's actually the government policy that has been rather successful,
arguably could have been more successful. And what I'm talking
about here is the Renewable Energy Independent Power Program, where
government asked for solar and wind and other renewable energy
source producers to put up wind farms and solar farms,
and ESCOM would buy or does buy that energy from
(31:19):
those power producers, and that energy gets fed into the grid.
Speaker 1 (31:22):
But let me interrupt you from it on that point.
One of the hurdles there, however, is that solar and
wind will only provide a small portion of the country's
energy needs right now. We're talking maybe a decade or
more from now where that actually becomes a meaningful replacement
from electricity that is generated by coal fired plants. Is
that correct or correct me if I'm wrong, Well, I.
Speaker 5 (31:44):
Think it depends the pace at which one executes on
the renewable energy program. So if we go back, the
renewable energy program really started at about twenty eleven twenty twelve,
so it's been ten years in the making, and the
way the plan was meant to work, they were arguably
meant to have been very many more megawatts added to
the grid than have current been added.
Speaker 4 (32:01):
So currently there've been six.
Speaker 5 (32:03):
Thousand megawatts of new energy added to the grid from
the renewable energy sources. That could have been a lot
more had the program been accelerated, had it not been
deliberately we think stalled in the kind of height of
state capture years the twenty fifteen twenty sixteen years, and
so yes, it is currently a small portion, but it
(32:24):
could be a very big portion. We've got abundant solar resources,
we've got abundant wind resources, and if you place them
in the right places over the country, they can become
a significant source of power. At the moment, the hurdle
to that is the transmission grid. So in theory, one
could add infinite amounts of solar and wind energy. But
the practical roadblock one's going to come up against is
(32:45):
actually plugging. I kind of think of it as plugging,
plugging that into the grid so those electrons can move
to my home and yours.
Speaker 1 (32:52):
And when we talk about transmission, we're essentially talking about wires,
wires from the generators to transformers and then into people's homes.
So I guess the fact that the organization and implementation
of the transmission plan just sitting on the minister's desk
suggests that the minister doesn't care if people's food is
riding in their fridge or that the kids can't do
(33:14):
their homework at night. Why isn't there a greater sense
of urgency on the part of the government to address
this foundational and substantial problem.
Speaker 4 (33:25):
I can't speak for the minister.
Speaker 5 (33:27):
I think that the points that are made from the
government side is that they are addressing it was urgency.
They've established multiple task forces and teams, and there's various
interventions at interministerial level that are looking at this problem.
And so there is a plan. There's a plan that
was released in July last year which is to address
the electricity.
Speaker 4 (33:48):
So there is arguably a plan.
Speaker 5 (33:50):
I think the question comes into are the interventions enough.
Is the timing of the intervention urgent enough?
Speaker 1 (33:58):
So from your perspective, they are moving with some alacrity
around this. It's not just stuck in the bureaucracy, and
it's not just people passing it down the line and
not getting the job done. There are meaningful steps being
taken to sort this out.
Speaker 5 (34:12):
Yes, I know, I think there are meaningful steps. I
think the urgency of the crisis is finally being highlighted.
I think what's concerning I guess for us is that
the lam bell has been rung on ESCOM for quite
some years now. So we knew way back in the
mid two thousands that we would run out of generation capacity.
Not a lot was expedited to address that problem. We've
(34:33):
known for quite some time that escom's debt was at
an unsustainable level. That's only been started to address as
of February with the Finance Minister's announcement in the budget
of the debt relief this year. You know, we've known
about the need for unbundling. In fact, unbundling has been
part of I think es COM's white paper as far
back as the late.
Speaker 4 (34:50):
Nineties to unbundle ESCOM.
Speaker 5 (34:52):
It's been part of the plan, but the action is
kind of happening at the you know, really when the
emergency becomes very dire, and so I guess the question
what we would have is in terms of the forward
looking view and what needs to be done crisis management
and applying the right attention and speed to decisions in
a crisis, Yes, that is important, but what is also
important is the looking forward and being able to plan
(35:15):
to avert a crisis so that we can take steps
today and tomorrow and this year and next year. And
using the transmission grid as an example, we know we
need investment in the transmission grid. We know these projects
take a long time anyway, they take between seven to
ten years to get them up and going. So let's
start now with that, and let's not wait for a crisis.
I think that's the challenge that we find is that
(35:37):
crisis management sometimes doesn't lead to optimal outcomes, and it
can What.
Speaker 1 (35:42):
Am I trying to say, You're trying to say that
sometimes it takes COVID nineteen for people to make good
public health decisions that they've been putting off for a
long time, and then they wait till the crisis arrives
before they take measures they might have taken years before.
And perhaps you're saying right now that South Africa has
an existential power generation crisis, and maybe it's taking a
(36:06):
crisis to force both the government and the private sector
to take the steps needed to resolve the problem.
Speaker 4 (36:13):
Yes, I think that's right.
Speaker 5 (36:14):
I think also the nature of the crisis and the
length of time it's taken us to get here, the
interventions need to be so much greater, and they need
to be done with utmost speed and precision. And I
think part of the challenge also is there can be
a tendency to wait for the perfect plan and to
formulate the perfect plan, And perhaps what might be needed
(36:37):
is a little bit more nimbleness in adapting to a
plan and to start executing and adapting as circumstances change.
So it might be that you try one thing but
it doesn't necessarily work. You can tweak it here, or
they're much better to do that at least there's some
food momentum that creates energy of its own accord upon
the pun. But yeah, so I think a certain level
of nimbleness and adaptability is also probably needed. What we've
(36:59):
been very good at, I think is diagnosing the problem,
identifying the problem, solving for the problem in a plan,
on a document, on a PowerPoint, at presentations, et cetera.
Where we've been less adaptable, I guess is in the
execution of the plan and in really sometimes making some
of the hard trade offs that are needed in executing
a plan. We're never going to make everybody happy all
of the time, and I think that's maybe the benefit
(37:21):
of a crisis is it does focus one's attention very
laser like on the immediate problem, which is the lack
of generation capacity that we have right now, and solving
load shedding, which is going to take years. It's not
a tomorrow solution.
Speaker 1 (37:35):
You're hanging in there as a debt holder. You're not abandoning.
Shep What are you optimistic about and what are you
pessimistic about when you look at the landscape right now?
Speaker 4 (37:45):
So I guess.
Speaker 5 (37:45):
Look, I'm a bond investor, and so we live in
the world of fear and on the world of hope.
So I'm much better at answering what I'm pessimistic about
than what I'm hopeful about.
Speaker 4 (37:55):
But let me try.
Speaker 5 (37:56):
So I think I think what we're seeing now is
the elevation of the crisis. It is receiving attention at
the very highest levels. That is a good thing. And
I think the link I guess between COM's the solving
of escom's problems and the solving our economic growth problems,
that is very clear. We've seen it in the numbers,
and so that is providing a level of clarity I
(38:18):
think to some of the decisions that are being made,
and so I think that's.
Speaker 4 (38:21):
All very good.
Speaker 5 (38:22):
I'm also very encouraged by and it comes out in
different forums, but certainly the increasing tilt to renewables are
moved to cleaner energy, you know, just energy transition. These
things are all important for us to manage as in economy,
actually as a planet we need to do. This is
one of the biggest emitters. And so the tilt to renewables,
the tilt to cleaner forms of energy is something I'm
(38:44):
personally and certainly Future Growth is very encouraging of and
very optimistic about. It is actually the solution to our
energy problems. So all of that very optimistic about. I
guess where I get pessimistic is in the lack of
the hard decisions that are needed to be made. And
I think where I get pessimistic is in the magnitude
(39:05):
of the problem. And so while it may have been
and one you know, can't look back, one must look forward.
Might have been few interventions a few years ago, the
magnitude of those interventions are so much bigger now, and
I think the challenge lies a lot in who actually
is responsible for delivering on the solutions. What we not
(39:26):
always clear on is what are the priorities. Does everybody
agree on the priorities and on the implementation of those priorities,
I think we can get a little bit muddled. One
department might have particular priorities that might not necessarily be
shared by another department.
Speaker 1 (39:40):
It sounds like South Africa needs and energies are given
the real authority to implement radical, speedy and thoughtful decisions.
Speaker 5 (39:51):
Well arguably that's the purpose of the new Electricity Minister
that was appointed by the President a few months ago, and.
Speaker 4 (39:57):
Again it's a part solution.
Speaker 5 (40:00):
His powers were only determined a week ago, I think,
And so given the urgency of the crisis, this was
announced in February, if I recall, and so two or
three months have gone by without the minister himself actually
knowing what his powers are to be. And so I
think that's the challenge, is that we know what needs
to be done, we kind of put a little plaster
(40:22):
on it and wait a few months, and then put
another little plaster on it and then wait a few months.
Speaker 4 (40:27):
And that's not really a way to address a crisis.
Speaker 1 (40:30):
We don't let people escape the show. I'll go without
sharing what they've learned. Crash courses about learning moments. So
you have been watchingscom for years, You've been watching this
problem for years. What do you know now that you
didn't know when you first began overseeing your investments in
as COOM.
Speaker 4 (40:51):
That's a very interesting question, Tim.
Speaker 5 (40:53):
So I think what is reinforced I guess for us,
certainly as investors, is that non financial risk factors, So
the ESG, environmental, social and governance risk factors are becoming
buzzwords now, but they actually translate into very real financial
impact and financial loss, and so you don't see it immediately.
And certainly in twenty sixteen, s COM's financial state was
(41:13):
not great, but it definitely wasn't what it is now,
which is way worse.
Speaker 4 (41:16):
And so I think that the real.
Speaker 5 (41:17):
Lesson has been that not paying attention to those non
financial factors, and the environment is another one, by the way,
the environmental costs and has a big role to play
in solving that for us as a country as well.
Not paying attention to those non financial risks do actually
translate into hard income statement, balance sheet and cash flow impact,
negative impact over time. And so I think the lesson,
(41:40):
certainly from an investment point of view, is that yes,
numbers must stuck up, but if you're going to be
taking and that is what we are asked to do,
is to take a forward looking view on a company
in this case es COM, one has to factor in
those elements, and particularly on the governance side, is to
look at, well, how's the company being run? Are the
right people in place, are they making the right decisions
and the best interest of the company. How's internal control
(42:02):
framework stacking up? How is risk being managed within the entity?
You know, all these seemingly boring questions but actually have
real financial impact that outlive I guess, political cycles, outlive
management contracts, outlive boards, tenure, and so there is very
much a need to focus on that if we are
going to be investing sustainably into the future with all
(42:25):
the risks that we are facing.
Speaker 2 (42:27):
Algo, we've run out of time.
Speaker 1 (42:28):
I wish I had more time with you. Thank you
for joining us today.
Speaker 4 (42:32):
Thank you Tim, and thank you very much for having
me on the show.
Speaker 1 (42:35):
Olga Contentatos is the head of credit at Future Growth
Asset Management. You can find her on Twitter at olg
so five two. Paul Burkhart, who also joined us today,
is a reporter with the Bloomberg News. You can read
his work on Bloomberg's website, the Bloomberg Terminal and on
Twitter at p Burkhart. Here at crash Course, we believe
(43:00):
that collisions can be messy, impressive, challenging, surprising and always instructive.
In today's Crash Course, I learned that all of the
horrors facing South Africa because it doesn't have reliable electricity
generation may be visited in other countries as well that
don't pay attention to how South Africa got here? What
(43:24):
did you learn? We'd love to hear from you. You
can tweet at the Bloomberg Opinion handle at Opinion or
me at Tim O'Brien using the hashtag Bloomberg Crash Course.
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show. This episode was produced by the
indispensable Anamasarakas, Moses Ondam and Me. Our supervising producer is
(43:49):
Magnets Henrickson, and we had editing help from Sagebauman, Katie Boys,
Jeff Grocott, Mike Nize and Christine Vanden Bilart. Blake Naples
does our sound engineering and an original theme song was
composed by Luis Gera. I'm Tim O'Brien. We'll be back
next week with another crash course.
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