Eskom’s Expanding Empire - The Social and Ecological Footprint of Africa’s Largest Power Utility

International Rivers Network & Earthlife Africa eThekwini Branch
Sunday, June 1, 2003

With a generating capacity of more than 40,000 MW, South Africa–based Eskom is Africa’s largest energy utility, and ranks as one of the top five energy utilities in the world. Eskom is a de facto monopoly in South Africa, and also generates over half the electricity produced in the whole of Africa, with operations in 31 countries on the continent. Because of its heavy reliance on coal, it is the primary source of greenhouse gas emissions in South Africa. Eskom management has also stated that it intends to rely increasingly on nuclear power. And in recent years, Eskom has begun to promote new dams and buy existing hydropower plants around the continent as it seeks to expand its influence across Africa. This paper explores the company's social and ecological footprint across Africa.

 Relying on Coal

Eskom produces about 90% of electricity generated in South Africa. It also owns and operates the national transmission system. Eskom operates 13 coal fired power stations, a large nuclear plant, two gas turbine facilities, two conventional hydroelectric plants, and two pumped–storage projects. Power station construction was based on projections of historic demand growth, and by 1980, it became apparent that Eskom had committed itself to expensive over–capacity, a situation that has prevailed for the past 15 years.

Coal will remain Eskom's major fuel source for the foreseeable future, though its intention to move forward with a controversial nuclear reactor indicates the seriousness of its stated goal to replace some coal with nuclear power. In 2001, Eskom used more than 94 million tons of coal to produce 181,511 GWh of electricity. Eskom remains South Africa’s single largest source of climate–changing carbon dioxide emissions. In 2001 CO2 emission increased from 159.4 million tons to 169.3 million tons. It is also a source of disease–causing air pollution. It is estimated that around 2,000 children die annually as a result of respiratory infections caused by air pollution in South Africa, the sixth largest killer of children under four in the nation.

Eskom receives its coal at rock–bottom prices. Due to large and relatively easily recoverable coal reserves, and a lack of accounting for the costs of environmental and social impacts, the cost of South Africa's electricity is of the lowest in the world. However, Eskom also generates a heavy foreign debt (in 1990, it amounted to about 45% of total public sector foreign debt and 16% of South Africa total foreign debt). The government's program to provide abundant cheap electricity to stimulate economic development has had costs that have been borne by all South Africans. As Jubilee 2000 South Africa observes, more than half of the World Bank's $200+ million in apartheid credits from 1951–66 were for Eskom's expansion, including coal–powered stations. But the benefits from this development did not find their way to the homes of the majority of citizens.

The low cost of Eskom's coal is attributable, at least in part, to lax environmental regulations in South Africa. Furthermore, the low price of energy encourages over–consumption and waste. Relatively little has been done to improve access to other fuels. Current energy planning continues to pay little attention to alternative energy sources. The heavy reliance on coal means that the environmental impacts are generally more severe than they would have been if the economy were based on other energy sources.

Eskom and Africa's Rivers

Eskom Enterprises in Africa
Eskom Enterprises in Africa

The company's private–sector entity Eskom Enterprises has a hand in electricity generation and distribution across a wide swath of Africa, and is currently involved in the electricity sectors of some 31 African nations. Its role in owning and operating hydropower projects is growing. In some cases, it is buying up existing dams, and in other cases is proposing to help finance or buy the electricity from new dams. As its influence around the continent expands, it is likely to be more involved in the damming of Africa's rivers.

According to the South African newspaper Business Day, Eskom Enterprises was formed to make up for a loss of revenue in Eskom that is expected to come from a government–ordered sell–off of some of its South African assets. The article states, "The development of projects on the continent is important for [Eskom] to drive revenue growth outside of its regulated business in SA "Government is planning to sell up to 30% of Eskom's generation assets in the next two to three years, which will lead to the holding company losing revenue it needs to make up elsewhere."

Eskom also manages or owns shares of hydro plants around the continent, including the following:

  • A 15–year operation and maintenance contract for the Manantali Dam in Mali, which Manantali will provide electricity to Mali, Mauritania and Senegal. This project has had severe impacts on the regional ecology, local agricultural production, fisheries, and public health. The reservoir forced 12,000 agriculturalists to resettle, and severely compromised their livelihoods.

  • A 20–year concession to operate Kiira and Nalubale dams on the Nile in Uganda (these dams currently supply virtually all the nation's grid–electricity).

  • A 51% shareholding in Zambia's Lusemfwa Hydro Power Company, which owns two hydropower stations in Zambia at Mulungushi and Lusemfwa.

In addition to expanding its controlling stake in existing hydropower projects around Africa, Eskom is the main beneficiary of the giant Cahora Bassa Dam on the Zambezi River in Mozambique. Under a controversial colonial agreement, Eskom buys most of the power from this dam, then resells it at higher rates to Mozambique.

The 2,000 megawatt Cahora Bassa, built by the Portuguese during the colonial era (and still 82% owned by the Portuguese government), is some $2.5 billion in debt, in part because of the absurdly low value of the Eskom contract. A March 29, 2003 article in The Economist magazine states: "Hidroelectrica de Cahora Bassa (HCB), the company that operates the power station, is obliged to sell most of its output to South Africa, at a paltry price that, amazingly, is fixed until 2030. Mozambique then finds itself re–importing power at market rates."

Eskom and the governments of Portugal and Mozambique continue to argue over the price Eskom pays for power from the dam, but Eskom is the 600–pound gorilla in the fight, and refuses to let its much poorer neighbor renegotiate the terms of the contract. "The situation is absurd," Carlos Vega Angelos, the chairman of HCB, told The Economist. "South Africa is selling back to Mozambique electricity we supplied to them in the first place, but at ten times the price." Eskom has stated it will not pay any more for power from Cahora Bassa than it costs to produce in South Africa. Eskom is now paying R3.7cents a kilowatt hour (currently equivalent to about a half a US cent) in terms of an agreement reached in 2001, after having paid only about R2 cents a kilowatt hour for seven years before that. HCB also wants payment to be made in US dollars rather than in rands, as the local currency has lost a large percentage of its value against the dollar. In January 2002, Angelos told Business Day that HCB might seek international arbitration over the deal.

New Dam Proposals

Eskom has expressed interest – sometimes very explicitly – in a number of proposed dam projects in Africa. It is a major player behind the New Partnership for African Development (NEPAD), an African initiative to attract more infrastructure investment to the continent. NEPAD has major implications for Africa's rivers. It will work regionally to coordinate and prioritize projects with the potential to deliver region–wide impacts. This has the effect of fast–tracking a number of potentially–destructive dam projects. It also provides new impetus to grid–extension initiatives like the Southern African Power Pool, which put hydroelectricity at the center of new power generation on the continent. At least 13 dam projects have been slated for promotion through NEPAD.

A few of the bigger and more controversial dams that Eskom has expressed interest in are described below.


Eskom is helping fuel a new dam on the Zambezi below Cahora Bassa, the Mphanda Nkuwa Dam, which is a priority dam under NEPAD. According to press reports, Eskom was instrumental in launching the Mphanda Nkuwa feasibility study and they have given the project prominent attention in various public presentations in 2002. As currently planned, the dam would be primarily intended to export peaking power to South Africa, as Mozambique cannot use the project's entire output of 1,300MW. Local NGOs believe that Eskom would be interested in helping to form a project company intended to build the dam.

Mphanda Nkuwa would displace some 1,400 people who have recently returned to the area following Mozambique's bloody civil war. It would also create serious problems for communities situated downstream. Because the dam would generate more power during certain times of the day than others, every day it will release a mini–flood of water that will disrupt fisheries, navigation, and agriculture for many kilometers below the dam. Many thousands of people would be affected by these floods. The full extent of these impacts was not sufficiently studied during the project's recently completed feasibility study.

The project's problems are not only social and environmental; Mphanda Nkuwa is also of dubious economic value. The US$1.7 billion dam would boost Mozambique’s already large energy surplus, which HCB has been unable to find a fair price for. Moreover, enlarging Cahora Bassa’s spillway or constructing a natural gas–fired power plant would boost Mozambique’s energy supply less destructively and at a much lower price.


According to Engineering News (South Africa), Eskom – which now operates virtually all of Uganda's electricity supply, through two existing dams – has been approached to become a potential partner (or perhaps even the major developer) of the proposed Bujagali Dam project. Ugandan NGOs, which have for years fought the project on economic, environmental and social grounds, met with Eskom in 2002 and publicly urged them to stay away from the controversial dam. The dam, proposed by the US firm AES, has been on hold since mid–2002, due to corruption allegations and AES's poor economic health. According to Engineering News, Eskom "sees the Bujagali project as possibly the next logical step in its involvement in the country." Reportedly, Uganda's President Yoweri Museveni met with Eskom officials to sell them on his pet project after ES began to have financial difficulties. In June 2003, news reports indicated that the Ugandan government was hoping to renegotiate an unfavorable contract it has with AES on the project's power costs, and is seeking new partners and financier to resume the dam project. On June 21, 2003, the Indian Ocean newsletter reported, "a decision on Eskom's investment would first assume a renegotiation of the Power Purchase Agreement with AES."


The peace accord in the Democratic Republic of Congo could herald a revival of the massive Grand Inga project, which ESKOM has stated it sees as a priority project. The Grand Inga scheme (another NEPAD project) is estimated to provide 40,000 megawatts from dozens of so–called "run of river" dams (two phases with a combined capacity of 1 775 megawatts have already been completed).

According to African Energy, the DRC's energy minister has discussed a draft agreement on Grand Inga with Eskom, which would increase grid connections between the two countries, provide electricity from the project to Eskom, and turn over operation of the capital's electricity distribution network to Eskom.

An article in Business Report (February 14, 2003) states, "Eskom Holdings and four other power utilities are forming a multibillion–dollar power company" that will "supply power from the Inga dam in the Democratic Republic of Congo (DRC) through Angola and Namibia to South Africa. It will be jointly owned and operated by the power utilities in Angola, Namibia, Botswana, South Africa and the DRC." Eskom sees the Grand Inga project as central to a regional plan to establish an African grid that could extend all the way to the Middle East and western Europe.

And a July 15, 2003 Reuters article stated that Eskom "has thrown its weight behind an ambitious project to light up the African continent through a unified grid by 2010 [which is] essential for the revival of the continent as envisaged by the New Partnership for Africa's Development (Nepad)." The article goes on to say this grid project will center around the Grand Inga Hydro Project.

A Greener Future?

Despite its reliance on cheap coal and its trend toward nuclear and large dams, Eskom also has taken some steps toward a more sustainable future. It also faces serious barriers to "going green." Thus far, Eskom has been moving slowly in adopting renewables, but renewable energy experts are pressing the government to adopt a "renewable energy portfolio standard" which would require 10% of all power to be clean renewables by a set date. According to Dr Steve Lennon, executive director of Resources and Strategy at Eskom, has stated that by the year 2020 renewables could account for about 4000 MW of South Africa’s generating capacity, or between 5% and 10% of total output (it is not clear, however, what is included in this definition of renewables).

Earthlife Africa Johannesburg's Sustainable Energy and Climate Change Partnership has commissioned research into renewable energy and efficiency policies and measures. The group's research demonstrates that it is possible to achieve significant renewable energy with no increase in cost to the economy. The group recommends that Government should set a target of 15% of total electricity consumption from renewables by 2020.

Wind power would play a major role in meeting such goals, as South Africa and other nations within Eskom's realm have very good wind–power potential. Wind experts in South Africa have also called for a national plan for wind generated electricity. The fastest growing power source in the world, wind power is only at the pilot project stage in southern Africa. Critics note though that the company is moving quickly into the nuclear field, and intends to build a new plant near Koeberg that has prompted legal challenges by the group Earthlife Africa. Liz McDaid, campaign coordinator, notes that wind energy is "far more likely to provide jobs for the skill level of South African workers" as compared to the hi–tech requirements of nuclear power. Currently, all wind equipment would have to be imported, which adds to its cost, but the potential exists for the development of a local industry, and for increased use of local components and manufacturing.

According to Eskom’s Chief Executive, Thulani Gcabashe, "there are a number of benefits to using wind energy. It is clean, saves energy, uses land resources sparingly, is safe and, obviously, wind won’t run out. At the same time we must not forget the limitations of wind – we cannot tell the wind when to blow, and the national resource is limited, meaning that wind is unlikely to play a major role in South Africa’s energy future. The intent of the current study is to define that role and to see how to place wind into its proper niche in South Africa’s energy mix."

Solar is farther along in the region. According to the South African energy ministry, "With South Africa having one of the highest solar resources in the world, it makes sense to develop technologies that make use of this energy source first " Research has shown that solar energy levels in the Northern Cape, for instance, reach around 2900kWh/m2 of land surface – as compared to levels of between 2100 and 2700 kWh/m2 in countries such as Jordan, India, Egypt and Spain – where solar energy is earmarked to be used to generate bulk electricity. Total solar potential across southern Africa amounts to some 360 GW, which is almost ten times Eskom’s current electricity output."

Eskom has a number of solar–energy programs, most of it on the scale of residential PV systems. But Eskom is also installing a large solar dish–engine project at the Development Bank of South Africa. The project is part of Eskom's solar thermal electric program, which aims to evaluate such technologies for implementation in Southern Africa. These systems are able to convert sunlight into electricity at higher efficiencies than any other solar technologies.

Solar–thermal systems use mirrors to concentrate the solar energy coming from the sun. A thermal receiver absorbs the concentrated beam, converts it to heat and transfers the heat to the generator, which then produces electricity. Solar dish–engine systems convert sunlight into electricity at higher efficiencies than any other solar technology.

Eskom is also working with Shell Renewables on one of the world’s largest solar rural electrification projects. When completed, the project is supposed to bring solar electricity to 50,000 homes in rural areas of the Eastern Cape. To date the joint venture has installed 6,000 solar home systems, bringing electricity to an estimated 30,000 people in the area. However, work has slowed after an initial push, and it is unclear if the project will meet its goals.

Demand–Side Management:

Conservation and techniques to reduce demand offer huge opportunities for Eskom. In 2002, Eskom announced that demand–side management (DSM) could reduce South Africa’s power demand by up to 11,000MW. These huge energy savings could significantly postpone socially and environmentally destructive power projects, and would come at a mere fraction of the cost. It is yet to be seen, however, whether the political will exists to allow DSM to realize its potential at Eskom.

DSM influences the amount or timing of energy demands to use scarce energy resources most efficiently. Through incentives and regulations, it conserves power that is already being produced, thereby postponing or even preventing costly investment in large–scale projects. It has numerous advantages over the construction of new power plants:

  • Because it uses existing supply, DSM does not have any significant additional impacts on people or the environment.

  • It is far less risky economically than building a large dam or power plant.

  • It is much cheaper than constructing new power plants. DSM measures typically cost less than US$0.02 per kilowatt–hour (kWh) while power from existing plants costs more than $0.05 per kWh.

  • It creates more jobs than new power plants. It takes many more auditors to inspect one million buildings, make recommendations, add insulation, and install efficient lighting, than it takes construction workers to build the power plants necessary to provide energy to the same one million buildings.

Eskom has had a large energy surplus for years. It currently only uses 80% of its 40,000MW generating capacity. More South Africans are enjoying the benefits of electricity than ever before, however, and demand is increasing. Residential energy consumption is expected to grow at an annual rate of 15% over the next decade.

This rapid growth creates a dilemma for Eskom. Residential electricity customers use the most electricity during the evening and early morning. As a result, Eskom’s capacity to cover these peak periods is shrinking rapidly, while off–peak surpluses remain high. Eskom projects that daily peaks will outstrip the surplus by 2007. The challenge is to find ways of meeting these peak needs in a cost–efficient manner.

One of Eskom's early ventures into DSM is a flourescent light bulb program. With financial support from the GEF (a World Bank environmental program), the utility is working to replace at least 1.25 million incandescent bulbs with energy–saving flourescent bulbs during a five–year period. Such a reduction in electricity demand could decrease carbon emissions by up to 244,000 million tons of carbon. Eventually, Eskom hopes to distribute some 18 million energy–saving bulbs, which it says could save 800 megawatts of energy per year.

The utility has much grander plans beyond its light–bulb program. When Eskom unveiled its DSM program in April 2002, it announced that it could achieve a savings of 7,300MW by 2015 through a combination of DSM programs (equivalent to five Mphanda Nkuwa–size power plants). Moreover, Eskom noted that this was conservative, and that a savings of 11,000MW is feasible.


As Africa's largest supplier of energy, Eskom is clearly going to be a major player in how Africans get electricity, and whether or not projects are developed in an equitable and sustainable manner. While it's not clear that Eskom Enterprises is financially able to take on so many large projects at this time (the company has said it will sell off some assets, and suspend new projects for now), it is still going to be a major player for a long time to come.

Regarding its involvement in large dams, Eskom in South Africa is currently party to a national dialogue on adopting the guidelines of the World Commission on Dams (WCD), which has set forth a process for moving forward with energy and water projects. It is not known how the outcome of this national process will affect the company, but this national process is not likely to affect Eskom Enterprises' work in the rest of Africa.

The WCD's main message is that continuing to plan and build dams as they have always been planned and built is unacceptable. Instead, it recommends a new approach to decision–making based on the principles of equity, efficiency, participatory decision–making, sustainability and accountability. The WCD's guidelines are applicable to all sorts of energy projects, not just dams. Adopting the WCD guidelines would be an important step for Eskom to take to ensure its projects do not do more harm than good.

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