Businesses in South Africa Plan for Grid Failure

The Sunday Times recently reported that, as a result of the unsustainable levels of load shedding in South Africa, key industries within the business sector are preparing for the possibility of a total grid collapse in order to ensure the safety of staff and the continuation of services. Although the South African Reserve Bank (SARB) has emphasized that a regional or national grid failure is unlikely, the prolonged and increasing stages of load shedding have caused concern among industries such as telecom, retail, mining, and financial services, leading many to engage in scenario planning in the event of a total grid collapse.

Companies in the communications, banking, and food industries have installed backup power and are accelerating their preparations for even deeper power cuts. MTN has established “war rooms” to maintain the operation of critical sites and the JSE has enough diesel to operate for seven days. Over the past year, MTN has deployed over 2,000 generators to counteract load shedding of stages four and higher. The telecom company stated that the constant pressure of power outages requires 24-hour monitoring and that power contingencies have been put in place in all provinces.

Mines have also installed generators to ensure the safe extraction of mineworkers, and the Reserve Bank recently disclosed that it is working with the financial sector and other industries to plan for the possibility of a grid collapse. This includes several food manufacturers and retailers, such as Tiger Brands, Pick n Pay, and Dischem, which have been forced to spend millions on backup power. Pick n Pay reported monthly costs of around R60 million to run its diesel generators, while Dischem reported costs over R36 million. Tiger Brands stated that the costs of operating in the current unpredictable and suboptimal environment are high, with the incremental cost of using backup generators between October 2022 and January 2023 being R27 million.

As of Sunday, February 26, power utility Eskom downgraded load shedding to stage 5, although it had been at stage 6 for almost an entire week, the longest stretch at such a high level since January. However, Eskom confirmed that over 7,000MW were removed from the grid at times, bringing load shedding to stage 7. Former Eskom CEO Jacob Maroga stated that the power utility technically implemented stage 8 load shedding this week, as any cuts above 7,000MW are considered stage 8. Despite these levels, businesses in South Africa still concur with the SARB’s assessment that a total grid collapse is unlikely, with Massmart regarding it as a low probability event.

The Bureau for Economic Research indicates that the electricity situation in South Africa remains dire, although the National Energy Crisis Committee (Necom) announced last week that Eskom has ample diesel supplies for now, which has helped prevent up to two stages of load shedding during peak hours. Without the diesel-powered turbines, South Africa would already be at stage 8 or even up to stage 10, considering the power utility’s technical implementation of stage 8 load shedding this past week.

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