South African economy crippled by blackouts
Businesses and homes are being hammered by power cuts caused by a fleet of decrepit coal-fired plants
‘When production is not taking place over six or eight hours, it goes down to billions of rand. Job losses too’
‘We are doing our level best to avoid total system collapse’
South Africa’s economy is reeling under the most severe electricity blackouts in the country’s history, as load-shedding threatens to trim growth further in the continent’s most industrialised economy.
This year was already South Africa’s worst on record for blackouts, when the country at the weekend hit “stage six” electricity outages for only the third time ever.
The escalation has meant most South Africans have been without power for at least six hours a day, hammering an economy that has been struggling to re-emerge from the effects of the Covid pandemic.
Cyril Ramaphosa, South Africa’s president, arrived back in the country on Tuesday after cutting short an overseas trip to respond to the crisis engulfing the state power utility, Eskom.
Analysts say blackouts were a major contributor to the economy’s 0.7pc contraction in the second quarter and the spate of breakdowns affecting the country’s dilapidated generating fleet is expected to continue. There have been 107 days of outages so far this year.
“We are doing our level best to avoid total system collapse,” said Andre de Ruyter, Eskom’s chief executive, as the crisis mounted at the start of the week.
Prof Sampson Mamphweli, director of the Centre for Renewable and Sustainable Energy Studies at Stellenbosch University, said the outages were having a “huge impact” on the economy.
“When production is not taking place over six or eight hours, it goes down to billions of rand. Job losses too,” he said.
Years of neglect, corruption and mismanagement at Eskom under the country’s African National Congress (ANC) government have seen it fall from a utility once lauded as the best in the world, to one that cannot keep the lights on.
Prof Mamphweli said: “We have coal power stations that were not properly maintained and there was quite a lot of neglect and that’s catching up with us.”
Eskom’s ageing 15-strong fleet of coal-fired power stations provides the bulk of the country’s power, but has suffered years of deterioration.
As the ANC government has delayed or bungled programmes to procure more capacity, the existing fleet has been run into the ground. Meanwhile, the utility was alleged to have been systematically looted during the rule of Jacob Zuma, the former president, and today’s executives admit corruption persists. Meanwhile, Eskom remains heavily in debt, with nearly £2.5bn in unpaid bills owed by South African municipalities alone.
The result has been frequent breakdowns that take longer and longer to repair, and rolling blackouts to protect the grid. Engineers at the utility say they have had their worst weeks in recent memory, suffering 90 breakdowns between Sept 3 and 18.
As blackouts have mounted, the knock-on effects have spread through the economy. Some mining firms say they have cut back smelting operations to prioritise power for mining operations.
Mobile phone networks have warned their services may fail. Vodacom this week warned the battery back-ups on its mobile phone base towers do not have enough time to recharge fully between blackouts. “These have limited power and will eventually fail,” the operator said.
Rival MTN says it is burning through 90,000 gallons of fuel each month to keep 2,000 generators running.
Small retailers without back-up are being hammered. Cashiers’ card machines are packing up during blackouts, leading frustrated shoppers to abandon shopping trolleys when the lights go out, as they cannot pay.
“South Africa’s growth potential continues to diminish” every day that the power cuts continue, economists at Rand Merchant Bank said.
“The outlook remains one of more pain to come as South Africa’s assets are fragile and prone to weakness in an environment of deteriorating fundamentals.”
Energy experts warned as far back as the mid-1990s that the country risked running out of power, but nothing was done. Load-shedding began in 2007 and has since got worse.
Eskom has said it intends to start signing deals this week to buy 1,000MW of additional power.
In July, after that month’s bout of stage six blackouts, Ramaphosa unveiled what he said was a power plan “to achieve long-term energy security and end load shedding for good”.
That involved attracting more private investment, speeding up the procurement of more generating capacity and fixing existing power stations.
As he arrived back to deal with the problem, he pledged the government would “remain seized with this issue until the situation is resolved”.
He said: “The severe load shedding of the last few days has reminded us how unstable our ageing power stations are.”