Innovative solutions required to solve SA’s energy crisis
Extreme load-shedding has put Nelson Mandela Bay on the back foot, creating an economic crisis with existing and future jobs and investment under threat.
Industry forms the backbone of the local economy home to over 42% of the SA automotive industry, the largest concentration of OEMs and component suppliers in the country and more than 40% of automotive industry employment is in Nelson Mandela Bay, with a multiplier effect of 21.5.
In other words, for every job in the auto industry, 21.5 jobs are created in the Bay.
And yet, Nelson Mandela Bay is the poorest of SA’s eight metropolitan areas by GDP and the official unemployment rate, at about 35, is one of the highest in the country
and higher than the national rate.
The Bay’s local economy is heavily skewed towards manufacturing, disproportionately so compared to other metros, illustrated by the fact that manufacturing accounts for at least 55% of electricity consumption.
We believe that, as has happened in other metros, that the manufacturing sector in Nelson Mandela Bay urgently requires a reprieve from loadshedding, or at the very least a more tenable alternative to the current load-shedding schedules that better accommodates maintaining production and output.
The survival of industry is critical to retaining jobs in the metro, and the signals are not looking good.
A survey conducted by the Business Chamber local businesses showed the devastating impact of load-shedding, with further retrenchments and disinvestment anticipated.
One in five businesses reported that they had retrenched staff or implemented short-time, and over 90% had put a hold on investment and expansion plans, while 36% were considering relocating out of the metro or leaving SA entirely.
More than 80% of the businesses surveyed reported negative impacts on production due to load-shedding, and just over half said backlogs and delivery delays due to production downtime hampered their ability to meet export orders or participate in export-orientated supply chains.
Impacts include cancelled shifts, increased overtime to keep up with demand and meet orders, increased breakdowns and damage to machinery due to frequent unscheduled stoppages, with resultant increases in scrap and waste material.
Some manufacturers operating on a seven-day week are reporting a 40% reduction in their production volumes.
The impact of load-shedding is worsened by the vulnerability of our substations to theft and vandalism, one of the worst cases being the explosion of the substation in the Coega special economic zone two weeks ago, which is currently subjected to an investigation.
Lack of maintenance of electricity and water infrastructure, and the impact of vandalism and theft, in turn worsens the metro’s severe water crisis and further contributes to the economic fragility.
Load-shedding has placed auto manufacturers and their supply chains extending from component manufacturers through to the services sector on the back foot in Nelson Mandela Bay, which has had a dire impact in recent months.
Meanwhile, auto manufacturers in Durban and in the Tshwane SEZ are exempted from all stages of load-shedding.
Local component manufacturers supplying Tshwane and Durban-based Original Equipment Manufacturers are placed at unfair disadvantage, with their businesses under threat due to inability to maintain continuity of supply and causing production line stoppages at their customers.
It is not just about the automotive sector the wool and mohair industry concentrated in the Eastern Cape, producing 50% of the world’s mohair and exporting through Nelson Mandela Bay, is also under threat.
As are agriculture and agroprocessing, including poultry, milk production and citrus, along with the major manufacturers in pharmaceuticals, beverages and bottling in the metro. As organised business, we are pursuing a number of solutions, working together with the municipality, to mitigate the impact of load-shedding on manufacturing.
These include a voluntary 24-hour load-shedding schedule for qualifying manufacturers as a more viable solution instead of the heavy impact of frequent production stopstarts, and piloting load curtailment whereby manufacturers reduce their electricity demand from load-shedding stage 4, enabling production to continue uninterrupted, albeit at lower levels.
Businesses are cutting nonessential load, such as air conditioning, to reduce overall demand on the grid and keep load-shedding at more manageable, lower levels.
Many manufacturers and other businesses are going to great expense to install alternative energy solutions such as solar, inverters, batteries and generators, to enable business continuity, and in turn reduce demand on the grid.
The Chamber’s renewable energy cluster has attracted most of the metro’s highest energy users, accounting for about 20% of local electricity consumption, to participate in a shared independent renewable energy generation facility, potentially bringing an additional 100MW of power onto the grid during 2025.
Though the regulatory environment around independent power generation has been eased, there is a need for more measures to encourage private investment in renewable energy, and to ring-fence renewable energy produced at the cost of local businesses, for their use.
As business, we believe we are playing our part in not only reducing our demand on the national grid but also in coming up with innovative solutions that can further reduce pressure on the grid while protecting the operations of industry.
Given the scale of the electricity crisis and mounting pressure to fast-track solutions to Eskom’s instability, we believe it is now more urgent than ever for business, government and other relevant role players to explore and agree on solutions, and implement them.