Last year’s outages cost companies millions in lost production and business and battered the economy, which was expected to grow by 1.4% in 2014. Growth is forecast to rise to 2.5% this year, but that is still well below South Africa’s potential.
“This year it’s a different situation. It’s negatively affecting the retail sector, it’s much more across the board and it’s much more immediate,” said Dennis Dykes, chief economist at Nedbank. “Unfortunately it certainly has the potential of hurting growth, anything between half a percent to one percent of GDP,” said Dykes. “It is a real constraint on the economy.” New data released by Statistics South Africa highlighted how the beleaguered state power utility Eskom, which generates around 95% of the country’s electricity, is unable to meet demand. Electricity production dropped 1.4% from January through November last year compared with the same period in 2013. In November, Eskom had to introduce power cuts across the country to prevent a collapse of the grid after a coal storage silo collapsed.
The outages escalated in December when swathes of the economic hub of Johannesburg were repeatedly plunged into darkness. Eskom, which relies on its ageing coal stations for supply, has warned of a high risk of more “load shedding” until March at least.
Eskom spokesperson Andrew Etzinger confirms that power supply at the state power utility is vulnerable. “There is a medium risk of load shedding on the grid at the moment and that will continue until the end of summer (March),” he added. To avoid outages, Eskom has been deferring maintenance on its old fleet of power stations, leading to a vicious cycle of breakdowns. “It’s like when you have a car and you don’t service it, eventually it will fail and this is what is happening,” said energy analyst Chris Yelland. “You cannot keep the lights on at any cost forever,” he said, predicting that South Africa will experience load shedding for at least the next two years while it waits for new power stations to come on stream and join the grid. “You’ve got to balance the need to keep the lights on with the need to do proper maintenance, which means load shedding,” he said.
The Medupi and Kusile power plants have missed a series of deadlines that has exacerbated the power shortfall in the country.