Eskom is now a leading economic indicator
The bottom line is that the economy cannot reach its full potential. By
Eskom’s performance has become a key economic indicator. If there is no load shedding or if unplanned outages are greatly reduced, that is generally an indication that the economy is tanking. When there is load shedding, that is a sign that the economy is gaining some traction. But it can’t go full steam in the face of power cuts.
As an indicator of economic growth or contraction, Eskom is almost second to none these days.
Take, for example, the utility’s recent State of the System update. It noted that the “accelerated maintenance programme” – aimed at keeping an ageing fleet of mostly coal-fired power stations from going belly up – “has borne fruit”.
Eskom said this enabled it to “limit load shedding to a minimum during [the] winter period. Since 1 April 2021, load shedding was implemented for 32 days. This includes the 11 days of load shedding implemented since September.”
Maintenance probably did play a role here, but the economy’s performance was also clearly a factor. For the five months from the start of April to the end of August, there were “only” 22 days of load shedding. But that period covers the bulk of the third quarter, when the economy is widely believed to have contracted. It includes the month of July, when the looting and social unrest that swept KwaZulu-Natal and Gauteng left many shops and other businesses smouldering ruins which would not have been using power.
This can also be seen in the graphic (see right) from Eskom’s data portal of weekly unplanned outages, which since the end of March 2021 peaked in May this year. During the second quarter of 2021, the South African economy grew 1.2% – on a year-on-year basis by more than 19% – and the spike in the volume of unplanned outages was clearly an indication of that.
Then there is a sharp decline in June and July, when the economy was almost certainly shrinking.
In this quarter, which began on 1 October, the economy was widely forecast to rebound back into growth and, lo and behold, weekly unplanned outages have been on the rise again. The stage 4 load shedding that was implemented this week was a clear sign that the economy was picking up pace.
This is something the ANC missed this week in its statement slamming the implementation of stage 4 load shedding, in which it questioned Eskom’s leadership. The ANC should instead have celebrated the fact that this suggested that the economy was on the rebound and that voters would be casting ballots on Monday against the backdrop of a growing economy. And it goes without saying that Eskom’s woes are not the fault of its current leadership, but a legacy of ANC mismanagement and looting.
This state of affairs was also abundantly clear during the second quarter of last year, when the economy effectively collapsed under the weight of the initial hard lockdowns to contain the Covid-19 pandemic. Eskom was able to keep the lights on then because there were far fewer lights to keep on as the economy dimmed.
“With the Covid-19 national lockdown in full effect, Eskom has experienced a significant reduction in demand for electricity. Electricity usage has dropped by between 7,500MW and 9,000MW since the lockdown came into effect last week. This has allowed Eskom to operate without the need to implement load shedding,” Eskom said in a statement on 1 April last year.
One can immediately see the problem here. Eskom simply does not have the capacity to generate power for a significantly bigger or more industrial economy – an economy that might create jobs instead of shedding them and start raising communities out of poverty instead of plunging them into the depths of it. Every time the economy starts growing, Eskom has no choice but to bring in load shedding.
A critic of this thesis might note that load shedding in 2020 was the worst full year on record (so far), a year in which the economy contracted 6.4%. But load shedding returned last year when the economy spurted again after the second quarter meltdown. As restrictions were lifted during the second quarter, Eskom in May and June – according to its archive of media statements – began load reduction in certain areas, which was also related to an upsurge in vandalism, as vandals could move about more freely.
Load shedding returned on 10 July last year, 10 days after the start of the third quarter, when the economy expanded by 66% after contracting 51% in the previous quarter.
Of course, there are other factors behind load shedding. Eskom has been accelerating its maintenance programme in a race against time as its ageing fleet breaks down after years of neglect and shoddy management. But there is also a clear link between Eskom’s performance and the economy’s performance – and it is a link which highlights the sad fact that the economy cannot reach its full potential.
Eskom simply does not have the capacity to generate power for a significantly bigger or more industrial economy