This column was first published in Business Day

The load-shedding shock has apparently not been big enough to cause any action.

The economy hasn’t fallen off a cliff in the first quarter and we have seen inherent robustness of the private sector. There appears to have been limited impact on party polling.

So, no problem?

The problem is this robustness breeds complacency (paralleling complacency on the unemployment and inequality crises) among policymakers. Yet it is worse than that. Energy experts have fully laid out in public in the past month the lack of wider energy policy coherence yet no action has been taken.

Analysts, investors and many parts of the media mistakenly think we are dealing with a simple government policy-formation, deployment and implementation machine.

Instead of productive panic, complacency is mixed with internal political factional battles, a blurring of party and state, rent-extraction elements clinging on, ideological lead weights, egos and personality clashes, micro-fiddling, a deep fatigue and a strange “Eskom cognitive dissonance syndrome”. This is a toxic mix in which policy and optimal strategies are far down the pecking order.

This goes beyond the need for polite discussions with alliance partners. It is important to unpack this mix because the lazy consensus is to assume that after the elections the deep threat of the financial and operational challenges at Eskom will suddenly unblock and problems at the utility will magically be solved.

There are some simple and obvious ways to fix the problems.

An enormous amount of political capital should be deployed through effective leadership to unblock channels, riding over ideological bonds and breaking with cognitive dissonance.

Eskom should be moved from reporting to the department of public enterprise to reporting directly to the Treasury. The idea of having a chief restructuring officer is a halfway house to this endpoint.

The National Economic Development and Labour Council (Nedlac) process for consultation over integrated resource planning (IRP) should be cancelled and a new least-cost version audited by the Council for Scientific and Industrial Research (CSIR) should be approved by the cabinet with emergency procurement of unlimited renewables (taking as much as possible at a set price of say 60c/kWh) within two months.

The key thing after the elections is leadership on Eskom, and energy policy that is credible and comprehensive, derisking of Eskom with international development finance institution funding of the just jobs transition, and a credible least-cost IRP that reduces electricity bills while stimulating growth.

It seems unlikely it will happen.

The financial need to achieve going concern will be so pressing in the six weeks after the election that everything else will be thrown out of the window. Eskom must have a new bailout 2.0 by the time it publishes its 2018-19 results towards end-June to achieve going concern, which due to the National Energy Regulator of SA (Nersa) tariff award it will not have at this rate. Add to that the recent evidence of liquidity problems at end-March.

Although going concern is not essential for dedicated emerging markets investors who understand the legal blockages in accelerating debt, for other creditors and companies and the public using electricity it is a dramatic event to have auditors declare that the entity is unlikely to be functioning in a year. The sentiment shock would be seismic.

The ideological fissures are furthermore too deep when mixed with personality conflicts. There is a core belief in much of policy-making land that as Eskom provided cheap electricity for so long, it can be part of a command-and-control developmental state solution that can solve all social and other problems including transformation and as such, while it may need to be unbundled, it is fundamentally okay. This is what “Eskom cognitive dissonance syndrome” is — trying to change it while not changing anything at all.

Rent extraction

Renewables are therefore still viewed suspiciously, something Eskom should really be doing, a nice-to-have around the outsides of the energy system but not at its core.

The same circular discussions about bailout 2.0 will still be had after the election, especially if the faces are unchanged, with the ANC’s national executive committee acting as a check on the whole process and rent-extraction elements circling.

What we are likely to end up with is a bailout with minimal conditionality, given that any credible conditionality will be politically impossible.

Yet there is a key need for conditionality on a deleveraged Eskom, more so given it could issue to investors in enormous size, unguaranteed at tight spreads immediately after such deleveraging. A low-leverage Eskom can be dangerous. Why the need for cost restraint, for not paying more for politically connected coal contracting? Why not offer large wage increases, or become the centre of building renewables?

This all becomes more affordable with slashed debt service costs — and is why conditionality is needed to deal with overstaffing, mothballing expensive capacity, cost control and other oversight restrictions. But more clever conditionality would also include ensuring wider energy policy coherence.

The urgency of the Eskom financial crisis can arrest the fatigue of policy makers. The fatigue of the operational issues however may be more challenging or even impossible to shift, and is why a much wider energy policy shift is urgently needed that overcomes the complacency and cognitive dissonance.

• Attard Montalto is head of Capital Markets Research at Intellidex.