The Rising Cost of Power Cuts: South Africa’s Ticking Time Bomb

South Africa is in the eye of an energy storm, and it’s leaving the economy with a hefty price tag.

Financial Fallout: By the Numbers

Minister Kgosientsho Ramokgopa revealed startling numbers regarding the economic repercussions of load-shedding:

• 2023 Projected Losses: About R400bn more than 2022.
• Tax Revenue Hit: An estimated R77bn, which is roughly 5% of the total 2021/22 tax earnings.
• Economic Activity Impact: An astounding R1.6-trillion, a significant jump from R1.23-trillion in 2022.

He poignantly said that Eskom’s ongoing struggles translate to the government’s diminished “ability to help the poor”. The backdrop for this statement? A lecture he was giving at the University of Pretoria.

South Africa’s Employment Crisis

Load-shedding isn’t just an inconvenience; it’s jeopardizing jobs. Ramokgopa expressed concerns over:

• Job Losses: Approximately 860,000 jobs may be lost in 2023 due to constant power cuts.

Highlighting the severity, Stats SA’s recent report showcased an alarming unemployment rate of 33%, one of the world’s highest.

Load-shedding: The Unending Cycle

Despite efforts to balance electricity demand and supply, 2023 has already seen the highest power cuts ever recorded in the nation:

• 2019: 75 days of load-shedding.
• 2020: A leap to 205 days.
• 2021 (till August): An unprecedented 218 days.

Sectors Under Siege: Mining in Distress

The mining sector, integral to South Africa’s economy, is taking a beating. Here are some worrying figures:

• Rail Disruptions: These pose additional logistical challenges for the already troubled sector.
• Tax Revenue: A report by RMB Morgan Stanley hinted at a potential halving of tax collection from mining companies in 2023. The projected figure stands at R50bn, plummeting from R110bn in 2021.
• Mine Output and Sales: Reuters stated a decline of 4.6% and 4.2% respectively over a 12-month period ending in May.

Eskom’s Expensive Solution: Diesel Power

In a bid to counteract the energy shortfall, Eskom is increasing its reliance on diesel-powered open-cycle gas turbines (OCGTs). The minister candidly shared the pros and cons: “The downside is that we are burning a lot of diesel, which is very expensive. The upside is that we are saving the economy.”

The budget for diesel?

• 2023: An allocation of about R30bn.
• 2022: A spend of R21bn, thrice the budgeted amount.

Ramokgopa made it clear that the use of OCGTs as a primary power source isn’t sustainable. He emphasized the need for a sustainable solution, saying, “[The OCGTs] are not designed to be run as baseload and we are shrinking their economic life”.

For some perspective, in July alone, the OCGTs operated twice as much as the same month in 2022. And comparing energy delivered over the first four months of the respective financial years: 2,113GWh in 2023 against 1,352GWh in 2022.

The crux? South Africa’s power crisis is a ticking time bomb, and sustainable solutions are the need of the hour.