Here’s how Eskom’s load shedding will zap R180 billion from SA economy
The South African economy is going to be hit hard by Eskom’s incompetence over the next 18 months.
Load shedding is likely to plague South Africa until mid-2021, with Eskom’s new CEO, Andre de Ruyter, confirming that critical maintenance would, in the interim, result in a decrease of generation capacity.
While South Africans bemoan the everyday impact of load shedding, which, at the best of times, results in frustrating disruptions to regular routines, economists have warned of a far greater threat, one which is likely to halt any prospect of economic growth in the short term.
The knock-on effect of Eskom’s incompetence comes at the worst possible time for the South African economy; with dismal growth forecasts hovering around 0.4% and credit ratings agencies standing masked beside the guillotine of ‘junk status’. As already noted by Moody’s and other well-respected leaders in the world of socioeconomic analysis, Eskom presents the single greatest threat to South Africa’s financial sustainability and, by proxy, its already-uneasy social footing.
In addition to exorbitant government bailouts – which are expected to exceed R300 billion over the next decade – the Cost of Unserved Energy (COUE), emanating from load shedding, paints a grim financial picture of the next 18 months.
Read: Here’s how you can check Eskom’s daily load shedding schedule
Load shedding and the Cost of Unserved Energy
The Cost of Unserved Energy is officially defined as the value – in Rands per kWh – that is placed on a unit of energy not supplied due to an unplanned outage of short duration. While estimates vary, with the Department of Energy putting the figure around R75/kWh and the Council for Scientific and Industrial Research’s (CSIR) conservative calculations closer to the R43,75, the general consensus is that minimal load shedding costs the South African economy between R1 billion and R2 billion per day.
Energy expert Chris Yelland has estimated that the COUE increases exponentially in relation to the stage of load shedding implemented, with every 1 000 MW shed siphoning more from the economy.
Baring in mind that Yelland’s figures are conservative in nature – and only take into account the event of ‘planned load shedding’ – de Ruyter’s 18-month warning comes with dire consequences.
Eskom’s emergency maintenance plan
Fundamentally, Eskom’s operational woes emanate from years of neglect. Failing infrastructure, including inactive power plants, which have either been dogged by corruption or maladministration, has put Eskom at the precipice of ruin.
De Ruyter, now charged with turning things around at the beleaguered state owned enterprise, has said:
“Instead of postponing general overhauls and midlife overhauls, we intend to return to the cycle of maintaining our plants as per the original equipment manufacturers’ guidelines. We anticipate the maintenance programme will go on for about a period of 18 months.”
A complete infrastructural overhaul, while undeniably necessary, will put power plants out of commission for extended periods of time and, as a result, necessitate load shedding.
Impact on the South African economy
If all goes according to plan – which is seldom the case when considering Eskom’s track record – South Africa will have to deal with load shedding until mid-2021.
Conservative estimates propose that Eskom will need to implement, on average, five days of load shedding a month.
If South Africa is to experience 90 days of load shedding over the next 18 months – taking into account the 15 days of load shedding already implemented in January and February 2020 – at a cost of R2 billion per day, the economy will be robbed of approximately R180 billion by the time Eskom’s emergency maintenance program nears its end.
The CSIR revealed that in 2019 the South African economy lost between R59 billion and R118 billion due to 530 hours of ‘planned power cuts’.