Image via: Gerhard Roux via Wikimedia Commons
Image via: Gerhard Roux via Wikimedia Commons
The lights are back on, yet it feels like no-one is home. The end of load shedding this week may have provided light relief, but its overall impact has been draining. Eskom are likely to sink even further into their black-hole of debt – currently estimated to be worth R450 billion – and it’s threatening to take South Africa with it.
Amid crisis talks and claims of sabotage, people in this country want answers. It seems as if things will get worse before they get better, making the new year one of fear and trepidation for energy production in Mzansi. According to the experts, our rough ride has only just started.
The worst case scenario for Eskom
City Press have pointed out that this historically-bad week is arguably as bad as things can get. They quote a recently-released report from the SA Reserve Bank (SARB), which states that the grid’s inability to provide 65% of its total power capacity would be the rock-bottom result for Mzansi. With 14 000 MW wiped from the supply last week, Eskom were only able to provide 63% of their total output. Yikes.
The utility is certainly flirting with danger. Had the extent of these cuts persisted any longer. this “doomsday scenario” – which has the potential to wipe billions from the economy – would have been realised.
What does load shedding cost South Africa?
One thing we can confidently say is that this recent round of load shedding – which spread across nine consecutive days in total – has already damaged the country’s GDP. Conservative estimates suggest that load shedding costs the country R775 million per day when it reaches Stage 4, which was a common occurence over the past week. Other experts reckon that figure is as high as R4 billion.
The multiple stages of blackouts – sometimes cranked-up to more extreme levels halfway through the day – could set South Africa back more than R20 billion in the long-run. Wowza…
Eskom: Chances of a recession increase
With gargantuan sums like this on the table, the chances of an economic meltdown have increased thanks to Eskom. Two periods of negative growth in consecutive quarters cause a recession. The figures from Q3 shocked a relatively confident nation, when a 0.6% contraction was reported at the beginning of the month.
Mzansi is already on the backfoot for Q4, as well. Adrian Saville is a professor of economics – he reckons that “at least 2%” has been shaved-off of growth figures for this quarter already, within its first two weeks:
Impact of @Eskom_SA load shedding over the last week:
— Adrian Saville (@AdrianSaville) December 12, 2019
= Days x Stage × .0578%
= [(7*4) + (1*6)] x .0578%
= 34 x 0.0578%
= 2% so far taken off 2019Q4 growth.
With 2019Q3 at -0.6%, inference is we are back in recession.
Merry Christmas!
cc @brucebusiness
What industries have been hit hardest by load shedding?
According to a recent report by SARB, five pillars of industry have been negatively affected by Eskom’s load shedding in 2019. These figures reflect how their growth outlook has regressed this year, as a direct result of power cuts:
- Agricultural (-0.27%)
- Mining (-0.19%)
- Electricity, gas and water (-0.18%)
- Manufacturing (-0.09%)
- Transport (-0.05%)
The bank have also established an inextricable link between load shedding and GDP contraction.
“South Africa’s total real GDP by these sectors contracted in a number of other quarters over this period in which either none or only low-intensity load shedding occurred.”
“The results show that as the intensity of load shedding increases, South Africa’s real GDP growth decreases by a statistically significant amount. The real GVA by all of the economic subsectors displayed a negative correlation to the intensity of load shedding, too.”
SARB on Eskom’s disastrous 2019
