South Africa needs to invest to rebuild confidence in power sector: minister

By Alexander Winning

JOHANNESBURG (Reuters) - South Africa needs to invest more to rebuild confidence in its ability to supply power, its energy minister said on Tuesday, after its state-run power firm was forced to implement some of the worst blackouts in years.

Problems at cash-strapped national power firm Eskom have shaken belief in South Africa's ability to power the continent's most industrialised economy, and hit business including in key sectors like mining.

President Cyril Ramaphosa has promised to split Eskom into three entities to make it more efficient, but labour unions and some within the governing African National Congress party view his plan with suspicion as it could loosen the state's grip over the power sector.

"We have to instil confidence in our ability to provide reliable power," Energy Minister Jeff Radebe said at a conference in Johannesburg, adding Ramaphosa's efforts to entice investment could otherwise be undermined.

"Deteriorating Eskom plant performance driven by old generation infrastructure confirms that we are now in need of more investment in new generation capacity," he said.

Years of mismanagement and governance problems at Eskom have left the company, which supplies 90 percent of South Africa's power, saddled with debt and ailing power plants, a situation Radebe described as "untenable".

Ramaphosa has been at pains to revive troubled state firms, which weigh on confidence in government finances and the economy, but the extent of their difficulties and disagreements over the way forward mean progress has been slow.

South Africa's largest trade union federation COSATU said on Tuesday a meeting with Ramaphosa and senior ministers including Radebe over the plan to divide up Eskom had failed to resolve differences over the policy.

"There was no breakthrough in the impasse over the unbundling of Eskom. We still need more detail," COSATU spokesman Sizwe Pamla said.

The last time unions launched major strikes at Eskom, midway through last year, power production quickly suffered.

Radebe also said on Tuesday an updated version of the country's long-term energy plan would be ready next month, later than initially planned.

Asked whether the government was looking to renegotiate the terms of older renewable energy projects, as another minister suggested this week, Radebe said the government would hold a news conference on its policy on independent power producers in the coming days.

(Reporting by Alexander Winning; Writing by Emma Rumney; Editing by Kirsten Donovan and Mark Potter)