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Show Notes:
In this episode, Kibz dives into understanding the nitty but not too gritty stories of supply and demand surrounding his foray into podcasting, how we get Ministers and Members of Parliament, #PutSouthAfricaFirst and Eskom Loadshedding.
Credits:
Producer and Host: Kibare wa Njuguna
Script Edited by Yalezo Njuguna
Music
Black Tie by Desire Zwane
Deep End by Desire Zwane
Follow – Up Links
Click here to comment on the Electoral Act
Click here to check out The Next Gen Podcast
Click here to check out Mzansi TV
Click here to check out The Told and Untold with Tshego Paledi
Click here to check out more music by Desire Zwane
See below for the full episode transcript
References
https://www.theguardian.com/business/2005/feb/05/enron.usnews
https://www.latimes.com/archives/la-xpm-2002-may-09-fi-scheme9-story.html
https://www.reference.com/world-view/law-supply-demand-bd544002f25eb639
https://www.investopedia.com/terms/p/priceelasticity.asp
https://www.oberlo.co.za/blog/podcast-statistics#:~:text=Summary%3A%20Podcast%20Statistics,-Here’s%20a%20summary&text=There%20are%20currently%20850%2C000%20active,of%2012%20listen%20to%20podcasts.
https://www.listerine.com/about
https://art19.com/shows/business-wars/episodes/78eb2c64-ce03-42ec-855b-d4281ebe349f
https://www.thesouthafrican.com/news/ramaphosa-cabinet-ministers-perks-salaries-2019/
http://www.saflii.org/za/cases/ZACC/2020/11.html
https://justice.gov.za/legislation/constitution/SAConstitution-web-eng.pdf
https://www.doingbusiness.org/en/rankings
https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB19-Chapters/DB19-Country-Tables.pdf
https://mg.co.za/article/2019-12-13-00-coal-is-destroying-south-africa-renewables-are-the-future/
https://www.groundup.org.za/article/eskom-and-sale-optimum-coal-mine/
https://www.huffpost.com/entry/timeline-nuclear-power-history-fukushima_n_1593278?guccounter=1&guce_referrer=aHR0cHM6Ly9kdWNrZHVja2dvLmNvbS8&guce_referrer_sig=AQAAAAUKVnZCN4LINY0WETJeAL4TCeSn1Ji7pdCjxzzH_jJlgeNKLMlndM08HHHIu0cvXEVRWX-Z518FyG1eflW0lfh5yOMTCxbb45ioErkT4DWrbJVIhnDvDiuEUyIY6Nqyv6MCwOUg0ALFgn2EK7-uB6xXzycWDvLWgqb_go2WXKdM
https://www.britannica.com/event/Manhattan-Project
https://www.businessinsider.com/godzilla-wwii-japan-nuclear-bombs-monster-kaiju-fishing-boat-2019-6?IR=T
https://www.britannica.com/event/Chernobyl-disaster
https://www.nrc.gov/reading-rm/doc-collections/fact-sheets/3mile-isle.html
https://timharford.com/2019/11/cautionary-tales-ep-3-lala-land-galileos-warning/
https://www.iol.co.za/news/politics/greenpeace-slams-zumas-claim-that-nuclear-deal-would-have-stopped-load-shedding-20043089
https://www.dailymaverick.co.za/article/2019-12-19-how-south-africans-thwarted-secret-putin-zuma-nuclear-deal/
https://screenrant.com/ninja-turtles-daredevil-same-origin-ooze/
https://www.forbes.com/sites/jamesellsmoor/2019/06/15/renewable-energy-is-now-the-cheapest-option-even-without-subsidies/#11b9b4045a6b
https://www.irena.org/publications/2019/May/Renewable-power-generation-costs-in-2018
https://www.sapvia.co.za/ease-licencing-restrictions-on-embedded-generation-below-10mw/
https://www.businessinsider.co.za/off-the-grid-for-businesses-load-shedding-south-africa-eskom-red-tape-nersa-licences-2020-1
https://www.miningweekly.com/article/mantashe-sustains-1-mw-licence-exemption-cap-despite-calls-for-higher-threshold-2020-03-27
https://www.businessinsider.co.za/residential-complexes-can-now-rent-solar-panels-and-pay-for-the-electricity-instead-of-the-hardware-heres-how-it-works-2019-12
https://www.engineeringnews.co.za/article/ramaphosa-proclaims-new-era-of-self-generation-as-power-shortages-deepen-economic-crisis-2020-01-14/rep_id:4136
https://www.businessinsider.co.za/eskom-energy-mix-power-plants-state-of-load-shedding-2020-1
https://www.idc.co.za/gro-e-youth-scheme/
Episode Transcript:
Kibare wa Njuguna 0:12
What’s poppin everybody? My name is Kibare wa Njuguna but my momma calls me Kibz. Welcome to my brand new podcast called Giveonomics. Where we’ll get an amateur’s perspective on matters economics. Why Giveonomics? Giveonomics is a combination, a portmanteau if you will, of give and economics. Economics is a really… it’s a really fantastic tool of understanding the world, and was totally lost on me when I studied it back in first year, my first year of university. I did enough to pass and move on to the next year, but I never really was mindful about what I was learning. I started really getting into economics through listening to podcasts. And this is when I realised that many questions or have a bad life can actually be answered by economics. Questions such as? Why is movie popcorn so expensive? Why do restaurants that don’t sell booze? or How do restaurants that don’t sell booze make money? Why do people buy pirated DVDs? What happened to Game of Thrones season seven and eight? Why do people who detest corruption still bribe the cops? Is there Foxi Naks mafia? And is Dexter from Dexter’s lab, an arms dealer? Now, in all honesty, I probably have to relearn everything I’d learned back in first year, because guaranteed is mostly all forgotten. The thing is, I believe that we should have learned some of these basic economic principles in primary school, so we can start applying many of these principles early in life. We are here now so we’ll get to experience a lender stuff together. I decided to throw in the word give because I strongly believe in trying to give as much as..umm… in trying to give as much or more than you receive. So as I learn, I’d like to give you my audience as much as I can. So since I’m not an economist, for the sake of labels, I’ll call myself an economics enthusiast or an amateur economist, not sure which one works better, but we’ll figure it out. Now. Let’s get on with the episode. Today, I’d like to talk about the most basic economic concept, the law of supply and demand. Reference.com defines the law like this: The law of supply and demand is a theory that explains the interaction between the sellers of a resource and the buyers for that resource. The theory defines that defines what effect the relationship between the availability of a particular product and the desire or demand for that product has on its price. So let’s break this down. Demand aka desire is what one is willing to pay to acquire good or service. So in theory, as the price goes up, the willingness to purchase goes down, since you theoretically rather spend your money on something else. So, supply is how much one is willing to receive to offer a good service. So in theory, as the price you’re willing to receive goes up, the willingness to make the good or service will go up since theoretically, you stand to make more money. This theory is not just limited to price, but can also go into stuff like quantities. So if there’s more of a good than the people willing to buy it, the price will go down to attract more buyers. And likely if there isn’t enough of a good in the market and too many buyers, the price will go up to match demand. So supply and demand, in theory, are inversely correlated, meaning when one goes up, the other should go down. And when the rate of demand means the rate of supply and everything is pretty much stable, then it’s said that the state of equilibrium. Now I say, in theory, because it doesn’t always work out that way. There’s so many other factors that determine the rate of supply and demand. And off the bat I can think of like environment. In general, South Africans that drink have their preferred poison. The price one is willing to pay for a bottle out of the bottle store changes during lockdown where the booze is prohibited. If the same bottle comes in an ice bucket inside a club, with sparklers bright enough for everyone to see the price that one is willing to pay can easily quadruple as compared to the bottle store. There’s also a concept in economics called price elasticity. Investopedia says price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change. So to put this simply, right? Elasticity is how reactive the demand is to any change in the price. So some goods actually quite reactive to a change in supply. So for example, like going on holiday. When the cost to go on holiday drops, the amount of people who may be willing to go on that holiday can actually increase.
So goods that are reactive in that way, we say are elastic, and are some goods are not very reactive to change in the supply. So as South Africans, a few of us know, a few of us know that queue before the first Wednesday of the month, when the petrol price is set to set, the petrol price increases is set to happen. So, we’ll be driving home, and every garage is like 10/15, cars just queuing to fill up the tanks. So, if the price of petrol shoots up, our driving doesn’t actually change that much because we also need to go to work or to drop off the kids at school and you know, stuff like that. These assumptions are being made, assuming that we’re not in the middle of a pandemic, because so goods that are not reactive to change in price, or change in supply are called inelastic goods. So I think we started to get a look just of supply and demand. So after the break, I’d like to go through a bunch of current day questions, see how it relates to an issue of supply and demand, and then present ideas and how we can remedy the situations. The reason I call them ideas is A) I’m not an I’m not smart enough to call them solutions as yet, and B) I want to leave everything open to discussion. So I’ll see you after these few messages.
[Ad Break]
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[End]
We are back with Giveonomics. I am Kibz and we’re talking supply and demand. The first thing we’ll talk about is podcasting. A podcast, where I chat about podcasting. Dom Cobb would be proud. So let’s talk numbers. As of the time of recording this podcast there’s an estimated 850,000 podcasts worldwide. This is compared to over 31 million YouTube pages. So one could look at that data and make the assumption that there’s room for podcasts to grow. And look at South Africa. I’d be hard pressed to find 1000 podcasts. The thing is, myself, like many other podcasters have created a product with very little idea of how much demand there is for this product. So for all intents and purposes, the demand is close to zero. The good thing is that this is actually nothing new. Many companies in the past have brought goods to the market with little to no demand. But I’d like to bring your attention to two in particular, De Beers, and Listerine. I’ll start with De Beers the more nefarious of the two. De Beers established off of the back of brutal practices and human rights abuses to mined diamonds in what was then known as the Cape Colony, in present day South Africa. Diamonds are some of the strongest materials on Earth. For my Marvel fans think of like adamantium, that’s on Wolverine’s claws. There was a market for diamonds as a drill bit that could go through rock because it’s that strong. But the De Beers company had other ideas. They found that some of the bigger diamonds look quite fabulous to the eye. So they embarked on the campaign to equate diamonds with love, and convinced the public that a man needs to spend a minimum of three months salary on a diamond engagement ring. This campaign was able to drum up demand for gem quality diamonds. One of the main problems with the supply of diamonds is that diamonds were not as rare as De Beers made us think they were. Over about 100 years, De Beers created a consortium with dammar producing countries and convinced all of them to control the market of diamonds that they released into the market. Listerine on the other hand was an antiseptic liquid that was used for surgeries and to disinfect wounds. The liquid is extremely useful in medicine. Dentists started experimenting with it in the mouth and discovered that it actually worked particularly well as a disinfectant in the mouth.
For Listerine to be widely accepted by the public Listerine had to drum up demand by practically inventing bad breath. After that point in time, the odour of breath was simply that, an odour, it what was just left over after brushing or doing your morning routine. Listerine went on to create the term halitosis, which actually means chronic bad breath, and started getting people to rinse with Listerine after brushing. Now, both of these companies had the supply, but had to put work in to create demand for their products. The difference is that one product was pretty virtually worthless while the other was something we did not know that we needed. Now to relate this back to the podcast, we have a bit of the same. I cannot be sure at this present moment, if my podcast is virtually worthless, or something you as the listeners didn’t know that you needed. Now, I can take a page out of the books of both Listerine and De Beers, and use my insane marketing machine and spam people on WhatsApp. Every time I drop an episode. Or even more cunningly, we can team up as podcasters and lobby the Minister of communication to have podcasts zero-rated by networks for educational purposes. But for now just appeal to all of you listening to tell a friend that you think may enjoy this podcast so we can just grow the demand.
Another place that we have a supply problem is actually within both the legislative and the executive branch of government. So, simply put, we have a supply problem within our ministries and our MPs, our members of parliament. The debate about whether the demand for them has been the demand for them being justified is a bit too complex a question for me, and it’s possibly a podcast for another episode. So for the purposes of this podcast, we’ll just assume that ministers and MPs are indeed needed. So I’ll start with the ministers. Ministers and deputy ministers are responsible for running government departments. These jobs come with massive responsibilities. and due to this level of responsibility, ministers receive a payment package of just over 200k a month, with the deputies deputy ministers earning just over 165k a month. The claim here is that their salaries have to be competitive with the private sector. I mean, we can kind of understand. The thing is there CVs and their resumes don’t seem to have to match CVs and resumes in the private sector. This is not fully their fault. The supply pool of ministers is actually extremely low. Ministers and deputies are actually political appointees recommended and assigned by the office of the presidency. So the supply pool is limited to those that the office of the presidency is aware of. Over and above that most of the ministers and deputies have political party affiliations. This further limits the pool of potential ministers and deputies. One of the ways that this can be improved is to open up appointments to other civil servants who may have worked their way up within the department and kind of give them an incentive to work to work towards the top job. As it so happens, a lack of party affiliation can actually be a hindrance to climbing the ladder. So another way would be to open up jobs to civil society, you know,maybe open the job up to competition from the private sector, since the salaries are already deemed to be competitive with the private sector. So yeah, some of you may be hearing this information for the first time and will be feeling a little bit touched, a bit angry, and rightfully so. But there’s a failsafe. According to our Constitution, ministers are accountable collectively and individually to Parliament, and have to provide Parliament with full and regular reports concerning the matters under their control. Let me just repeat that. Ministry ministers are accountable collectively and individually to Parliament, and have to provide Parliament with full and regular reports concerning matters under their control. Now, MPs Members of Parliament are supposed to spend around 40% of their time reporting to the people they represent. So for all intents and purposes, that’s us the voters but there’s where the problem lies. The average South African does not seem to know which Member of Parliament represents the voice in Parliament and which member of parliament to hold accountable for that 40% that is supposed to be spending dealing with us
So for every issue I highlight in my podcast, I should essentially be able to follow up with, you can contact your member of parliament. But for now we cannot. The good thing is that in 2020, we have been afforded a once in a lifetime opportunity. A Constitutional Court decision made on the 11th of June, in the case between the New Nation Movement and Others vs the President of South Africa has deemed the Electoral Act to be unconstitutional. So, pretty much the way we vote for people in Parliament is unconstitutional. And the parliament has been given 24 months to to amend or replace the act.
So us as citizens need to make sure that the law which is passed actually benefits us, and allows us to actually vote people into parliament who we can hold directly accountable. Because as it stands right now, we kind of not we’re not able to hold these people directly accountable to us, for the time they spend in Parliament, and for the decisions they make in Parliament. Because for all intents and purposes, the parliament if it’s their job to hold the ministers to account, it means we should be able to tell the members of parliament “Yo, this is the ministry I have a problem with.” and they should haul these guys into parliament and constantly hold them into account. But for now, we are not able to do that. And that’s why I brought up the changes to the electoral act. I will live I will leave a link in the show notes so that you can actually go and make comment on what the new electoral act should be, and, and what you think it should mean and what you think should include what you think you should exclude. And you guys also, you can let me know, I’ll leave my contact details at the end of the podcast. Also, let me know if you feel it necessary for me to do an episode on elections and the electoral process, especially as it deems to us in South Africa.
My next story involves a hashtag that’s been gaining momentum during the lockdown. #PutSouthAfricaFirst. The Put South Africa First movement is fully against foreign nationals, but particularly those of African descent, and South Asians of the Muslim faith. One of the key issues being debated is the hiring of foreign nationals by South African companies, despite there being a very high unemployment rate among South Africans. We have a limited supply of jobs in this case and my issue with this is the part where the foreign nationals are receiving the blame. The problem here lies with the fact that many of these companies hiring foreign nationals have pretty much reduced the demand for South African labor by putting in exploitative working conditions. We’re talking about pay way below minimum wage, we’re talking about extremely hazardous and unsafe working conditions. And in many places, very, very long, working hours with very few breaks. The rhetoric that will that will be put forth to encourage this treatment is using terms like foreigners work harder, or South Africans are lazy. And let’s not forget that the exploited will always label the exploited lazy the moment that they have to pay them a fairer wage. We have seen this happen time and time again. When they’re slaves they’re hard working when you have to pay them they’re lazy. It’s It’s hard work exploiters will always call the people the exploit lazy. The narrative of blaming the foreigners put forward but the Put South Africa First movement implies that they have no issue with the exploitation. So just allow me to read from section nine of the South African Constitution, the section dealing with equality. Section nine, everyone is equal before the law has the right to equal protection and benefit of the law. Equality includes the full and equal enjoyment of all rights and freedoms to promote the achievement of equality, legislative and other measures designed to protect advanced, advanced persons or categories of persons disadvantaged by unfair discrimination may be taken. The state may not unfairly discriminate, let me repeat, the state may not unfairly discriminate directly or indirectly against anyone on one or more grounds including race, gender, sex, pregnancy, marital status, ethnic or social origin, color, sexual orientation, age, disability, religion, conscious belief, belief, culture, language and birth. No person may unfairly discriminate Directly or indirectly against anyone on one or more grounds in terms of subsection three, national legislation must be enacted to prevent or prohibit unfair discrimination.
Now bear with me here.
What if African nationals were treated by the State and the people of South Africa and we’re afforded the same protection under the law that citizens and non-African foreign nationals are afforded. And here, the laws I’m referring to specifically labor laws, and Criminal Procedure laws. Then the exploited foreign nationals would actually be able to report unfair working conditions without the threat of severe punishment from the State through, for example, you know, lengthy detentions without due process or, or deportation because the state can do that. Reporting these companies who exploit our African brothers and sisters, reporting, these companies would force them to make the pay, the hours and the overall working conditions better, which would immediately make South Africans who are protected by labor laws actually able to compete for these jobs. So you can imagine the irony of telling a supporter of Put South Africa first, that the best way out of the situation, is to actually fight for foreigners to get paid more. It’s interesting. Some of you may want to put pressure on the Minister of labor to start cracking down on these unscrupulous companies. For that, I’ll say contact your member of parliament and since we cannot please enough get to go and comment on the electoral act. It’s time for short break. But after this break, we’ll go into our main story, Loadshedding.
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[End]
Welcome back to Giveonomics and our main story day involves Eskom and loadshedding. For more one or two non-South African listeners, Eskom is a state owned entity or a parastatal that has a monopoly on electricity supply in South Africa. Loadshedding is a term used to describe a period to describe periodical rationing of power. So this is due to a difference between the electricity supply available and the demand for electricity. Loadshedding has been a temporary measure to deal with the shortfall and for those of you from developing countries will understand when I say it has been temporary for about 13 years. The electricity issue in South Africa is becoming very serious. Our current our current sitting president Cyril Ramaphosa campaigned in a ticket of kickstarting South Africa’s economy started his reign, our rank on the ease of doing business has actually dropped from 82nd to 84th out of 190 countries. One of the factors used to calculate the ease of doing business, the score is getting electricity. Our ranking in getting electricity fell from 109th worldwide in 2019 to 114th in 2020, so it seems pretty important to get an understanding of our electricity situation. Loadshedding started in 2007. But during the naughties the world had been captivated by the fall of a huge electrical giant called Enron. Enron is a private electricity supplier that supplied public electric grids in the US. Enron was extremely corrupt, and known for pulling shady tactics, and they were known especially for what they did in California, The State of California. In 1998, the State of California passed legislation to regulate the price of electricity for the benefit of its citizens. Enron used many tactics to circumvent the regulation, but its most devious tactic was creating a string of blackouts to create a false shortage of supply, forcing electricity regulators in California to increase the price of electricity. So when loadshedding started in SA, there was a heavy suspicion that a similar plot was afoot. That loadshedding was done to create a false shortage and hike up the price of electricity. The suspicion was half correct.
At the time, and pretty much till now, a huge chunk of our electricity comes from the burning of coal. This actually puts South Africa as one of the top carbon emitters in the world. At the time, many coal mines are on a long term fixed price contract to supply coal to Eskom, and a few of the biggest suppliers had partnered up to limit the supply of coal creating the crisis. So just like with Enron, those who suspected the shortage was manufactured were actually kinda right. That was in 2007. In 2008, right, we actually had an economic crash, and then a World Cup to host in 2010. There were plenty of infrastructure projects happening all over the country, and more and more households were being added to the National Grid. So even if the coal supplied was to increase the ability of our core plus to match the demand was not actually possible. This was actually made worse last year in 2019, when South Africa experienced a massive increase in rainfall, and like a lot of floods, and the floods actually destroyed a chunk of our coal supply. Some of you are wondering if there was a problem with coal, all the way back in 2007. Why was this? Why was there still this huge reliance on coal twelve years later? Why not try something different? The thing is between 2007 and 2019, renewable energy was not fully at a price point to be adopted on a large scale by by developing countries. So coal in this case, was fast becoming a poor source of supply, kind of like the example I gave with our ministers. But at that time, there was another option, nuclear energy.
From the jump, nuclear energy had a bad rap. It was developed by Robert Oppenheimer and the Manhattan Project deep, deep in the deserts of New Mexico, with the aim of destroying other human life by means of creating an atom bomb. In August of 1945, two nuclear bombs were dropped devastating Japan, and searing the image of that mushroom cloud in everyone’s collective mind. In pop culture, the index the inexplicably devastation, and that fear of radiation generated from those two bombs actually gave birth to a monster, who was just as inexplicably inexplicably destructive, a monster called Godzilla. In the 50s, a method was figured out how to turn that devastative force into a sort of perpetual energy by means of using nuclear reactors and nuclear power plants. But in the 60s, by the 60s, there was a huge lack of environmental policies. And that allowed a lot of nuclear plants to just dump the waste created by those plants, wherever they pleased. The radiation from the waste was actually causing cancer in many communities, and was giving a lot of deformities in newborn babies. And this created a generation of people protesting nuclear waste. I mean, they they protested a lot of other things. But we know this generation as the hippie generation, the 60s. In pop culture, these nuclear waste events were so common, that nuclear waste accident spills are responsible for giving us heroes from the same exact neighborhood. So Matt Murdock, while trying to save an old man, ended up being negatively affected by radioactive nuclear waste spillage that turned him blind, giving us the Daredevil. In the same exact neighborhood, a spill of radioactive waste happened to spill into a sewer, mutating a rat and four turtles giving us the Teenage Mutant Ninja Turtles. What are the chances? Same exact neighborhood. I mean, you can’t make this stuff up. I mean, it is made up but you…you get what I’m saying. This waste is clearly a large problem. With a bit more regulation in the 70s. A lot more countries started adopting nuclear energy. And it was a small turnaround in the image of nuclear power till two separate events happened. The first event was a meltdown of a nuclear reactor at a place called Three Mile Island in Pennsylvania, the United States. This was in 1979. This actually tarnished the image of nuclear energy worldwide. This is actually a nice take on what happened at Three Mile Island from Tim Harford’s podcast called Cautionary Tales. This episode is named LaLa Land: Galileo’s Warning, I’ve actually left a link to the podcast in the show notes if you want to just give it a listen. The second event was the explosion of the Chernobyl plant in the Ukraine, 1986. This was pretty much the nail in the coffin for the image of nuclear power for most of ordinary citizens around the world. The thing is, what connects Daredevil, the Ninja Turtles, Three Mile Island and Chernobyl is actually a mixture of human actions, design flaws, gross negligence, and of course, nuclear power. So, a lot of a few other countries actually recognized that nuclear power wasn’t the main problem, just linking those, there’s a lot of other things that were in place to link those, those, those events and they actually continue building nuclear power plants, but putting like a whole bunch of procedures and protocols in place to reduce the chances of such disasters reoccurring. I mean, after the panic died down, studies actually show that the radiation released by the Three Mile Island Disaster was equivalent to that of a chest x-ray. Let me repeat that. The radiation released by a three by the Three Mile Island disaster was equivalent to that of a chest x-ray. Also, as it turns out, the Daredevil and the Ninja Turtles were created from the same exact nuclear spill. So there wasn’t multiple spills, there was just one really, really bad spill and we hope in those comics, that they also put procedures and procedures in place to prevent those spills from happening again. Unfortunately, also, I cannot in good conscience reduce the effect of Chernobyl, Chernobyl was was a bad disaster. And it’s truly one of the worst case scenarios of what can happen with nuclear energy. So back to South Africa, in South Africa’s case back in the late 2000s. There was a huge aversion to nuclear energy, and just like Listerine, and De Beers would have to figure out a way to drum up demand. It turns out that an aversion to nuclear energy wasn’t going to be our only problem. Just like with Enron and the State of California, our plan to go nuclear would involve corrupt parties looking to use this opportunity for financial gain. The corrupt party in this case came in the form of Jacob Zuma, and a highly irregular deal with President Vladimir Putin and the Russian government to spend about a trillion rand on a nuclear program in South Africa. This deal even involve the signing and firing in under four days of finance minister Des van Rooyen, who was assigned to solely get that deal signed and pushed through. This left an extremely bad taste in South Africans mouths when it came to any further discussions of nuclear energy. So, with coal being a poor option, and nuclear being off the table by the year 2019, renewable energy was now becoming a great option. Now, just a quick definition of renewable energy. Renewable Energy is Oh, sorry about that. Renewable Energy is energy that is collected from renewable resources, which are naturally replenished on a human timescale. So such as sunlight, wind, rain, tides, waves, and geothermal heat. So to break it down for those of you wondering what a human timescale is, human timescale is an estimate of how long a human a human may live. So it’s anywhere from around 80 years old to possiblea 150 years old. So, like with solar power, when the sun sets, normal solar burn comes back tomorrow. powers back so it renews every day. But fossil fuels like oil and coal have taken millions of years to form. So whatever we use, is not coming back anytime soon. Another great example of renewable of a renewable good, not necessarily renewable energy is wood. But it depends on the type of tree right? So for example, if you make a kitchen counter using wood, instead of using granite, or granite, when you say granite, so if you use wood instead of granite, right? granite is a rock that has taken billions of years to form, right? Billions and the huge number of trees can actually grow fully in under 150 years. So trees are kind of a renewable resource, provided that the people who cut them down plant new ones in return. But yes I’ve digressed, we talking about renewable energy, and specifically in regards to electricity generation. So, a report released by the International Renewable Energy Agency (IRENA), released in May of last year 2019 actually show that as of 2018, renewable energy is the cheapest energy to produce even without any subsidies and in many cases, and in many cases unsubsidized renewable energy is actually cheaper than subsidized fossil fuels. So, let me put that in perspective, raw renewable energy, even if your government tries to subsidize coal and oil and natural gas, in many cases turns out to be cheaper than subsidized fossil fuels. So, and this is across the board. So it’s from the cost to install, the cost of maintenance of the renewables, even the cost of generating electricity. So an article written by James Elsmoor from Forbes gives further detail. Article states, “among other findings, the IRENA report highlights that onshore wind and solar power now frequently less expensive than any fossil fuel option without financial assistance, new solar and wind installations will increasingly undercut even the operating only costs of existing coal fired plants. Low and falling technology costs, make renewable renewables the competitive backbone of energy decarbonisation, which is a crucial climate goal. And then the cost cost forecast for for solar and onshore wind continued to be revised as new data emerges. And this is actually beating what they had earlier, earlier expectations. So, over and above, above that 20% of the world’s energy currently, that’s being produced is renewable and still growing. The question here is, if it is so cheap, and so easy now, why hasn’t Escom started rolling out renewables. Eskom is a giant that has built its entire infrastructure and culture around coal. We have seen giants like this fail to adapt quick enough to new technologies, even when they’re the ones who invented the new technology. Examples. Kodak as a company couldn’t adapt quick enough from film in cameras to digital photos. Nokia and Motorola were very dominant during the era of third generation cell phones, but they were too slow to adapt into the fourth generation. And they got overtaken by the 4G phones like Samsung, Huawei, Apple. And then the most recently is just simply being able to WhatsApp a link to a meeting. Literally, being able to WhatsApp a link to an online meeting destroyed Skype’s dominance. Skype has been dominant for years when it comes to online meetings. So Eskom, in this case might just not be equipped to adapt. I mean, think about it. Eskom spends a bulk of its money repairing and maintaining aging coal power plants, and hundreds of substations, is constantly constantly replacing stolen thick, high voltage copper cables, and I’ll be witness to this because we didn’t have power for a full day last week, yeah it was going into a second day just simply because cables were stolen. It wasn’t loadshedding just cables were stolen. Eskom also spends a lot of his money paying our pensions, and especially due to a constantly growing life expectancy, which isn’t a bad thing, by the way but financially could be a bad thing. But in life, it’s great that people are living living longer. Eskom is also paying consultancy fees to a lot of its retired former employees to maintain a lot of the outdated management systems and more recently, Eskom has had to really have a lot of money channelled towards legal fees and coaching to prepare a lot of the employees and former employees to testify in running corruption investigations. So when all is said and done, there is actually there actually isn’t much left in terms of finances for Eskom to work on new renewable energy technology. So the question some of you may be asking is who can step in to fill in this gap? Is there a nimble competitor out there in the words of Silicon Valley, and I’m personally not a fan of this word. They’re disruptive. Who’s the SanDisk? Who’s the Apple? Who’s the Samsung? Who’s the Zoom? For Eskom? The answer is, I’m not sure. Until recently Eskom has had the sole license to distribute power across South Africa. A license that is distributed by the Ministry of Mineral Resources and Energy, and regulated by the National Energy Regulator of South Africa, who are referred to as NERSA. The ministry decided to extend an olive branch by allowing soft generation of power. Let the President say it his own words,
President Cyril Ramaphosa 40:38
but in December, one of the things president Pitshana that we came up with was to say, Let us now embark on a new trajectory when it comes to energy of allowing self generation, and for the first time, we’re now saying, Let us have self generation. Now, as we move forward, we beginning to address all those policy issues that have introduced uncertainty, inconsistency, we are addressing them. We now opened up a new era, a new era in the history of our energy resource generation, if you like. A new era that says, we now are embracing the fact that there are those companies, there are those even families or households that want to generate their own energy. This for me was brought more home because one day…
Kibare wa Njuguna 41:46
One of the main issues raised because of self generation is the cap. Production of electricity is capped at 1 megawatt with additional licensing by NERSA, if you would like to generate between 1 and 10 megawatts. So before even starting the development of a project, NERSA can delay the project by up to a year while conducting its licensing processes. Now for many of us here, we don’t really understand what one megawatt truly means. one megawatt can modestly power about plus/minus 600 homes. So as a homeowner, remember of a body corporate in a small complex, this limit doesn’t affect you that much. Okay, so for big businesses, corporate buildings, shopping malls, larger complexes, they can easily go up to three megawatts, with a number of mines and manufacturing plants needing between five and 10 megawatts. So it’s estimated that by pushing the cap up to three megawatts, one can potentially add 500 megawatts immediately to our power supply. And if they take the limit from one to 10, then there’s companies is ready to add 2000 megawatts to the power supply. And this is actually just simply based off of businesses that have shown interest in self generation. So currently, Eskom generates 42 megawatts in total 42 gigawatts not megawatts, Eskom currently generates 42 gigawatts. So simply just changing the limit can increase the supply by 5%. Literally, if you just say limit has changed, Our electricity supply can change by 5%. So allow me to digress slightly into solar installations. The two main types of solar installations, you get what’s called grid-tide installations and off-grid installations. A grid-tidee installation are where the solar power is installed, and linked to the national power grid that’s run by Eskom. And it’s in such a way that they kind of work hand in hand. So pretty much when the sun is out, the system will use more solar and less Eskom. And then on cloudy days and the evening hours, you’ll end up relying more on Eskom and then less on the solar. Grid-tied solutions are a really great way to reduce your electricity bill and to reduce your reliance on Eskom. The one drawback is that if load shedding occurs, you can still get affected because you sharing with Eskom. The second one off-grid installs actually mean that you have your entire supply completely disconnected from the national power grid. So since you cannot rely on Eskom to make up for that shortage of power on cloudy days, and a shortage of power in the nighttime, you need to install extra solar panels, you know, to kind of make up for the shortfall and also install a lot of batteries like a ton of batteries. So going off grid actually requires a whole lot more money or capital to pay for the extra solar panels and then to pay for the extra battery power. And the battery power normally generally is three times the total cost is generally about three to four times the total cost of the solar panel installation The good thing about being off-grid is when loadshedding happens, what’s loadshedding? is just doesn’t affect you. So, due to the heavy heavy capital outlay and finances required to run a solar project, you’ve got companies like Solar Africa, that are offering what’s called the private power purchase agreement, or in simple terms are called a PPA. So this is simply where the company will put up all the infrastructure, and then they’ll charge you for the electricity supply. But generally, they’ll kind of tie to a very long term contract so that they are able to, you know, guarantee that they’ll get their money back. And almost all PPAs that are currently running are for grid-tied installations because even off grid, the infrastructure for off grid installs is too expensive even as a PPA, it’s very hard to justify that cost. Now that we’ve got a slightly better understanding the whole solar and renewable energy thing we have an standing of the cap, the limited electricity, the limitations, we also have an understanding of the President’s promise to ease regulations in January of 2020. We can now fast forward to March the 26th of 2020. On the 26th of March, the Minister of Mineral Resources and Energy Gwede Mantashe gazetted an amendment version of Sheduled 2 of the electricity Regulation Act. It eased up on a number of restrictions, a number of them, but maintained the one megawatt cap. Yes, they kept the one megawatt cap. I think right now is a better time than none to just take a break.
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[End]
Hey, everyone, welcome back to Giveonomics. And we are naively trying to fix loadshedding. What we do know so far is that we do not have enough electricity. Most of our electricity is powered by coal, which is not ideal and nuclear is not an option. And there’s a one megawatt cap preventing adoption of renewable energy. So what I failed to mention, before the break, is that the announcement of the 26th of March, only caps grid-tied, self generated power to mourn megawatts. So for those of you can afford to fully go off the grid, there’s actually no limit to the cappage. So I guess we can call that some sort of silver lining, right. So where to from here? Well, this may, this is actually going to be an exception for future podcasts because I actually have some workable suggestions towards solving the problem for this podcast. So the one megawatt cap is actually still good enough to power up to 600 homes. So if you’re a risk taker and have a bit of an entrepreneurial streak, you understand this renewable energy stuff, we’re better than we do or us actually understanding really well, because it’s very complex. If you’re under 35, the IDC has actually got what’s called the Gro-E Youth Fund, which is targeted towards young people under-35. Doing green energy projects, the fund is very low interest. And depending on the project, you can have a three to five year grace period before having to start paying back the loan, and the loans are between 1 million and 50 million Rand. So for example, like a one megawatt, one megawatt plant can cost you between like 12 and a half million to around 20 million. So it’s still within that Gro-E youth fund bracket. If you do your cost benefits and you’re actually interested in powering areas with limited access to electricity or simply want to power some up and coming residences, the fund is really worth considering. And you can be like Solar Africa and start providing PPAs and whatever you deem fit. That means you can also help in creating jobs because we have an unemployment crisis and you can be part of like our loadshedding solution. So that’s that’s kind of one solution. The second solution was given by our president.
President Cyril Ramaphosa 50:08
So we have arrived at that. And so government, government is moving ahead, addressing all those issues, which you have raised, which a number of you have raised. And yes, we may be slow. But where we are slow, we say, keep raising the issue. Get us to up the tempo, so that we begin to move faster, because in the end, we are really,
Kibare wa Njuguna 50:36
This is the part where I say, right, call, email, your MP. postcards, put consistent pressure on NERSA, email your MP, and get your MP to put consistent pressure on NERSA and the Minister of Mineral Resources and Energy to do the right thing, but many of us cannot. So I’ll reiterate how important this moment in time is, we have the chance to change the electoral system so we can finally identify with and have members of parliament that serve and are accountable to us as South Africans. I will leave a link in the show notes for you to go comment, and put suggestions on how you’d like the electoral system to be. Of you five listeners that tuned in. If you’d like me to attempt an episode on elections yet again, please let me know so we can get a better understanding of what’s being asked from us.
For this, my first episode of Giveonomics, very nervous. I would like to thank my brother Yazz, for constantly pushing me to create and put my ideas out there. I’d like to thank my best friend, Irshaad, for actually putting me on a few economics podcasts, and sitting through all my rants and raves about the world. Also, I’d like to thank my parents for understanding the economic situation, and not asking me to get a real job. And lastly, I’d actually like to thank each and every one of you, who tuned in and listened all the way this far. You guys are truly the real heroes.
This has been an episode of given nomics, which is a product of Enraptured Podcasts. It was produced by me Kibz with help from Yalezo Njuguna, you can connect with me by dropping me an email on giveonomics@gmail.com or visiting the website giveonomics.wordpress.com. Yes “.wordpress.com” because we don’t have dot normal com money. So giveonomics.wordpress.com Thanks for tuning in. I’ll catch you next time and don’t forget to comment on the Electoral Act. The theme for this episode was brought to you by Desire Zwane. It’s called Black Tie. I want to thank Desire for also the additional music that I used within the podcast, and have a great rest of your day andnd I’ll catch you guys soon.
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