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Rolling blackouts final nail in the coffin for ailing economic growth

Dec 15 2019 14:32

Power insecurity has weighed on the sluggish South African economy, already dogged by high and rising debt, low growth and record-high unemployment of 29% over the last decade.

"Job creators are retrenching staff and/or going out of business," warned the CEO of the National Small Business Chamber, Mike Anderson.

Analysts at wealth asset management company Anchor Capital said the level of load shedding has heightened concerns that the economy could slip into another recession.

Indigo Ellis, an analyst at Verisk Maplecroft echoed this sentiment, saying "power cuts are (the) nail in the coffin for economic growth".

Growth contracted further by 0.6% in the third quarter of 2019, after falling 3.2% in the first quarter.

Power outages strike slap-bang in the middle of the day

As if choreographed by a puppet master, stores along the aisle of a Johannesburg mall hurriedly shut their doors one by one as soon as power outages strike slap-bang in the middle of the day.

"We have to close the store immediately because people can steal... the card machines also don't work without electricity," a 23 year-old clothing retail worker told AFP.

Since 2008, state utility Eskom has sporadically implemented rolling blackouts - rationing up to 4 000 megawatts at a time - to help prevent a collapse of the electricity grid, a process known as "load shedding".

But this week, the crisis suddenly worsened as Eskom rationed 6 000 megawatts from the national power grid, prompting the worst cuts in the country so far.

The power outages have caused many businesses to lose out on hours of sales during the peak festive season, threatening an already fragile economy.

"Most of them have to close shop as they can't afford alternative solutions such as generators and renewable energy such as solar systems," the CEO of the Black Business Council, Kganki Matabane, told AFP.

Across town about 60 kilometres south of Johannesburg in the crucial industrial manufacturing hub known as the Vaal Triangle, industrialists reel from the unstable supply of power.

"The big industries that start up furnaces lose an obscene amount of money when there are blackouts," said Jaco Verwey, vice-chairman of the Golden Triangle Chamber of Commerce.

"Firstly they lose money on downtime. Secondly they lose money on restarting again because they need more electricity to restart their furnaces."

The organisation boasts around 450 member businesses, 33 of which pay a combined electricity bill of R100m a month.

Businesses, big and small, are plunged daily into darkness for nearly five hours at a time, sometimes even multiple times a day.

Electrifying losses 

Large underground mines, among the largest contributors to GDP, suspended some shifts this week to avoid trapping miners in the belly of the earth when the electricity cuts out.

AngloAmerican spokesman Sibusiso Tshabalala told AFP that its "South African operations have been impacted by Eskom load shedding".

"While we have response plans ... this is not a sustainable solution as it is costly to run generators," he said, adding that sustained power outages resulted in reduced revenues and production.

Hundreds of tourists, hoping to catch the aerial cableway at the top of Table Mountain, were left stranded for nearly three hours this week after load shedding escalated to stage 6.

Even telecommunications networks were forced to beef up on backup power to maintain customers' connectivity during load shedding.

African giant MTN reportedly spends up to R100m rand on battery generators for every three days of electricity blackouts.

But for some, like retailer Shoprite, the outages have resulted a spike in sales of alternative energy and lighting products such as candles, paraffin, gas bottles, emergency lights and kettle braais.

"South Africans often use load shedding as an opportunity to cook on the braai (barbeque)," the Shoprite group told AFP.

Eskom blames its old and poorly maintained coal-fired power stations which struggle to keep up with the electricity demands of Africa's most industrialised economy.

The debt-laden utility generates around 95 percent of the country's electricity.

South Africans were so livid about the power outages that President Cyril Ramaphosa cut short an official visit to Egypt to come back and meet with Eskom executives.

Upon his election in May, Ramaphosa vowed to turn around all state entities but Eskom has proved to be "the villain that leaps out of the bath in a rage when you thought that he was dead," as author and analyst Howard Feldman describes it.

Ramaphosa critics, as well as his supporters, say he will need to improve the economy if he wants a second term in power.

Many say the current crisis is a result of years of mismanagement and corruption during the decade of Jacob Zuma's presidency.

Despite multiple bailouts, including the latest $4bn lifeline by parliament, Eskom said it expects overall debt to rise to the equivalent of $30.8bn in the fiscal year ending March 31, 2020, up from $30bn a year earlier. Eskom forecasts a net loss of R20bn for the year.

Calling it "too big to fail", Ramaphosa unveiled plans to improve the utility's performance by breaking it up into three units, saying that the current system was "unreliable" and "unpredictable".

eskom  |  load sheadding  |  electricity
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