Electricity generated in November dims
Electricity production declined in November as rotational power cuts increased during the month, adding pressure on economic activity as well as business confidence.
Stats SA data released on Tuesday shows electricity production for the month fell 3.3% year on year. It also deteriorated 2.7% on a monthly basis, which RMB analysts said was due to an increase in load-shedding to 630 hours in November from 263 hours in October.
Absa senior economist Miyelani Maluleke said this week that Eskom’s energy availability factor stood at 53% of installed capacity with breakdowns at 13.4GW, while a further 8.4GW was offline for planned maintenance.
“We believe the stability of electricity supply will remain a critical factor for the growth outlook in the year ahead, not only in terms of its effect on shortterm economic activity, but also through its effect on private sector business confidence,” Maluleke said.
SA’s deteriorating power supply further highlights the Reserve Bank’s concerns that longer and more frequent bouts of load-shedding in 2023 may have shaved two percentage points off GDP growth, based on an expected 250 days of loadshedding, up from a calculated loss of 0.7 percentage points in 2022.
However, the bank said lower anticipated levels of power cuts could translate into a smaller 0.8 percentage point detraction from GDP growth in 2024.
According to Deloitte Africa, the rolling blackouts are estimated to have cost the country
between R400bn and R600bn in 2022 while an estimated 11,970GW was lost between January 1 and May 10 last year — more than the loss for all of 2022.
Deloitte said the cost of 14 years of systemic power failures is likely to come to more than R3-trillion.
Risks pertaining to the lack of power supply are also captured in the Allianz Risk Barometer, an annual business risk ranking tool. The barometer found that critical infrastructure blackouts were the top issue for businesses in SA for a second consecutive year.
“The report underscores the urgent need for investment in infrastructure resilience and the development of contingency plans to mitigate the potential consequences of blackouts,” said Thusang Mahlangu, CEO of Allianz Commercial SA.
Oxford Economics senior economist Jee-A van der Linde said Eskom’s system status outlook for 2024 is worse than ever before, indicating that SA can expect to experience an electricity shortfall of about 2,000MW every week.
“This is bad for the economy, as businesses will yet again be compelled to shield against the disruptions of load-shedding, which limits their ability to expand their operations,” Van der Linde said.
“As such, a meaningful pickup in employment and earnings growth is unlikely, with uncertain investors becoming more reluctant to operate in a less competitive market.”
Moreover, Van der Linde said, continued rapid grid defection by the private sector may only accelerate the death spiral of the utility, resulting in significant electricity price increases for those who can least afford it, which would also reflect in higher consumer price inflation.
“SA’s draft updated electricity plan shows load-shedding will continue to undermine the economy until at least 2028,” Van der Linde said.
RMB chief economist Isaah Mhlanga said the financial services group estimates the private sector will add just more than 6GW of energy to the country from 2023 to the end of 2025.
From 2025 to 2030, a further 19.3GW will be added, taking the cumulative addition to 25.5GW from this year to 2030.
“We expect load-shedding to decline in the lead-up to the 2024 elections, before the private sector investment completes more projects in 2025,” Mhlanga said.
“By 2026, private power will add up to 6GW of energy, helping to offset Eskom’s declining supply.”
Johann Els, group chief economist at Old Mutual, said while the monthly electricity production numbers for November are poor on a monthly and annual basis, some perspective is required.
“The monthly data tends to be volatile but, when looking through the data noise, it is interesting to note that the average of October and November is still 2.7% above the average of quarter three electricity production,” Els said.
That perspective is what is going into fourth-quarter GDP data, he added.
Els said he is not disputing the country’s dismal overall electricity production, but the numbers show that fourth quarter output is up from the previous quarter.
“Even if electricity production is unchanged in December from the November level, quarter four production will be 2.3% higher than that of quarter three,” the Old Mutual economist said.
“That is 9.4% on an annualised basis and certainly is a slightly better picture and will help GDP in the fourth quarter.”