Pretoria - South Africa's government says that rolling power cuts that forced shut-downs of the country's largest mines and a market sell-off made for a national emergency, but could be prevented from denting economic growth.
Africa's largest economy has been rocked by power outages for two weeks that have darkened houses, brought businesses to a standstill and stoked demands for a shake-up of President Thabo Mbeki's government.
"It is the view of cabinet that the unprecedented, unplanned power outages must now be treated as a national electricity emergency that has to be addressed with the urgent, vigorous and coordinated actions commensurate with such an emergency situation," Public Enterprises Minister Alec Erwin said in a briefing in Pretoria.
South Africa used to generate more power than it needed, but a booming economy and insufficient infrastructure investment now means supply no longer meets demand.
Mines shut operations
The extent of the crisis was highlighted on Friday when AngloGold Ashanti, Harmony Gold, Gold Fields and Anglo Platinum suspended operations because of the electricity supply problems.
Other mining firms followed suit.
South Africa's gold sector lost 7.3% of its market value, its biggest one-day percentage drop since August, and gold rose to a record high shortly after the news. The precious metal was trading around $922 an ounce.
Mining is a cornerstone of South Africa's economy.
The rand, the country's currency, weakened by more than 1% against the dollar, to R7.065, while bond yields jumped sharply.
Worries over economy abound
The mine shut-downs raised fears that South Africa's booming economy, which grew at 5.4% in 2006, near a three-decade high, could suffer a slowdown as a result of what many residents see as a self-inflicted energy crisis.
"It's likely to impact on economic growth, and it is certainly going to impact on our fixed investment effort, which is sort of the centrepiece of our growth programme going forward," Johan Botha, senior economist at Standard Bank, said.
Critics have lambasted the government for failing to heed warnings, some dating back more than a decade, that power capacity would not be sufficient to meet rising demand in its growing economy.
It had been urged to make significant investments in the sector, including construction of new power generating plants.
Deputy president Phumzile Mlambo-Ngcuka, who was once in charge of the energy sector, apologised to the country amid a rising clamour for heads to roll as a result of the crisis.
Coal demand biggest culprit
State power utility Eskom plans to spend R300bn on new power generation and improving its infrastructure in the next five years, while acknowledging that it could take just as long for the power crunch to ease.
Eskom CEO Jacob Maroga, who was also at the briefing in Pretoria, blamed high demand for coal as one of the biggest problems facing the utility. Maroga briefed Mbeki's cabinet on the crisis earlier this week.
"There has been a surge of demand for coal, and as a result of that, some companies who used to be the reliable suppliers of coal to Eskom are beginning to see greener pastures elsewhere to the detriment of the South African society," Maroga said.
Erwin, however, tried to calm worries of an economic slowdown, saying that healthy growth rates could be maintained if consumers and businesses changed their behaviour and used energy more efficiently.
"One of our key objectives is that we maintain our rate of economic growth," Erwin said.
On the JSE by noon, AngloGold Ashanti had lost 26.69%, to R293, Gold Fields weakened 7.11%, to R109.50 and Harmony gave up 5.15%, to 7 776c.
- Reuters