Eskom’s power cuts dampen jobs outlook

SA’s moribund economy sent into a tailspin

ESKOM extended its massive power cuts yesterday, sending the country’s moribund economy into a tailspin, despite a marginal improvement on the country’s employment print.

The debilitating load shedding entered its second consecutive day, leaving industry stuttering after the power utility cut 3 000MW from the grid, despite President Cyril Ramaphosa expressing his disgust and interventions from Public Enterprises Minister Pravin Gordhan.

On Monday, Eskom sliced 4 000MW from the grid.

Analysts warned that the continuing power cuts would undermine the slight shift in unemployment, which improved marginally from 27.5 to 27.1 percent.

“Load shedding is normally rand negative, as a lack of power supply affects the country’s economic numbers, as production and manufacturing fall,” Andre Botha, senior dealer at TreasuryONE, said yesterday. “This could have a detrimental effect on the growth number out of South Africa.”

Yesterday, Statistics South Africa said the mining and manufacturing industries, which are among the country’s largest consumers of electricity, added a combined 79 000 jobs in the fourth quarter, while finance and other business services added 109 000.

But blue-chip mining company Harmony Gold pointed to Eskom as the biggest threat to the survival of the industry in South Africa.

Harmony said Eskom’s proposed 15 percent-a-year tariff hike over the next three years could shorten the lives of energy-consuming mines and place jobs at risk.

The JSE-listed company said it was mulling the use of biofuels and solar energy as alternative sources of power to buffer the impact of Eskom’s proposed tariff increase and load shedding.

Chief executive Peter Steenkamp said its Kusasalethu and Moab Khotsong mines were particularly at risk.

“The 15 percent-a-year increase will kill Kusasalethu, and Moab Khotsong, which are big consumers of electricity,” Steenkamp said. “The increase will change the life of our mines and impact on jobs.”

Melanie Naidoo Vermaak, Harmony’s head of sustainable development, said the miner had reduced its power consumption by 10 percent a year.

“We have applied to the National Energy Regulator of South Africa to tender for a 30MW solar-powered plant in Welkom,” said Naidoo Vermaak.

Gordhan yesterday admitted that Kusile and Medupi power were badly designed and not performing to required levels.

“These outages have a massive impact on the economy – from mining, big industries, manufacturing to small businesses like coffee shops,” Gordhan said.

“It also causes huge frustration, uncertainty, vulnerability and fear among communities and households.”

Eskom said that it anticipated that its load shedding would continue into the second quarter in April.

Econometrix chief economist Azar Jammine said the direct impact of load shedding on the economy was between 0.1 and 0.2 percent of the gross domestic product a week.

“That’s what we have at the moment, and that is the short term effect,” said Jammine.

“The longer-term effect, which is worrying me more, is that capital investment decisions will be put off by this.”

Adding to Eskom’s woes was that five power generation units at the utility’s troubled new Medupi plant were reportedly drowned in ash.

Clyde Bergemann Africa, which was contracted to supply and construct the dust handling units, withdrew its staff from the power station.

Helen Francis, a Moody’s senior credit officer, said that the electricity system in South Africa was under extreme pressure and the reserve margin was likely to remain tight until at least the mid-2020s.

“Longer-term improvements will depend on the evolution of energy demand, as well as the pace of further growth in renewables, embedded generation and new gas capacity,” Francis said.