South Africa’s energy crisis could push its economy further into the dark

Continuous load shedding could cost the country $250m a day

A private security guard scouts the surroundings using his torchlight from a hill facing Mount Moriah suburb in North of Durban. Countrywide blackouts of up to 12 hours a day are rolling across South Show more

Countrywide blackouts of up to 12 hours a day rolling across South Africa could deal a fatal blow to its fragile economy, experts say.

Blackouts, or “load shedding”, have occurred intermittently since 2007, but have become worse in recent years as ageing coal plants pushed to their limits suffer frequent breakdowns. Coal accounts for around 90 per cent of the country’s electricity supply.

The situation is made worse by an illegal strike that has prevented emergency repairs from being carried out, Andre de Ruyter, chief executive of Eskom, the national electricity provider, said at a media briefing on July 1.

“If the workers do not heed the call to return to work, then the country will be further exposed,” Mr de Ruyter said.

Unions wanted up to a 15 per cent pay increase, more than double the current inflation rate of 6 per cent.

Eskom’s data published at the end of June showed that more than half its fleet was out of service, and around 40 per cent of power plants were broken down, with another 8 per cent under maintenance.

Economists have described the blackouts as a crisis, one that threatens to undo an economic rebound based on robust commodity demand.

Load shedding at this pace could cost the economy 4.1 billion rand ($250 million) a day, says Isaah Mhlanga, chief economist at financial advisory firm Alexander Forbes.

“The signal to investors is that we are doing reforms, there have been some positive developments. But on the other hand, they are looking at South Africa and asking: ‘is this where we want to put our money, given there is no energy security?’ ”

South African President Cyril Ramaphosa aims for his administration to attract 1.2 trillion in investments, and has made attracting capital the government’s core task.

In March, Mr Ramaphosa told an investment conference in Johannesburg that 95 per cent of this target had been achieved.

However, the extent of the current power cuts could undo much of Mr Ramaphosa’s work, says Mr Mhlanga.

“I think if you are a serious businessman, you will look elsewhere to put your money — where you can have consistent energy supply,” he says.

Meanwhile, businesses are scrambling to find alternatives. Last year, the government finally cracked the door on Eskom’s monopoly, allowing private investors into electricity generation of up to 100 megawatts, enough to power a small town.

Solar panels on rooftops and wind turbines in farmers' fields are becoming common sights around the country. Still, for many corporate energy users, the national grid remains a vital resource.

MTN, Africa’s largest mobile phone network operator, said it is struggling to keep its towers working for extended periods of time. It uses batteries and diesel generators, but these are not intended to run for hours at a time, says Jackie O’Sullivan, MTN’s Corporate Affairs executive.

“The problem is the batteries do get stolen … a huge issue for us. Even when in place, batteries have a capacity of six to 12 hours, but then need 12 hours to recharge. Under current conditions they don’t have the time to fully recharge,” she says.

Similarly, diesel generators need to be refuelled, posing a challenge, especially for remote stations.

“We are using 400,000 litres of fuel a month at this rate, which is obviously costing us a lot and is also not the most environmentally friendly solution,” Ms O’Sullivan says.

As a stopgap, MTN plans to crowd source generators from small suppliers and businesses. “If a business has a few generators, they can take over a couple of sites and help keep customers connected with their friends, families and businesses,” she says.

However, the situation is unlikely to improve anytime soon. Eskom has a debt of about $25bn, and Mr de Ruyter is battling demands for his resignation. Criminal syndicates within Eskom continue to syphon off money across the organisation, he said recently.

Last year, Eskom burnt 1 billion litres of diesel in emergency generation and is likely to top this figure in 2022.

Meanwhile, the larger cities such as Johannesburg, Cape Town and Pretoria, are all planning to adopt renewables and other forms of electricity generation, further reducing Eskom’s income.

Mpho Phalatse, the Mayor of Johannesburg, the country’s largest urban industrial area, said earlier this month that the city would soon begin contracting its own providers.

“The idea is to introduce independent power producers into our mix. It’s through partnerships with the private sector that we’ll put load shedding behind us,” Ms Phalatse said.