Cape Town - The ongoing load shedding by power utility Eskom will have a dire impact on the country’s economy as investors go elsewhere and consumers pay more, say experts.
Janine Myburgh, president of the Cape Chamber of Commerce and Industries, said Eskom was going backwards and had already lost a quarter of its generating capacity – with more under threat.
“Relief from the new power stations remains a promise, and with construction so far behind schedule and so much over budget, it is the inability of Eskom to deliver on its promises that gets the attention. These failures undermine confidence and investment is all about confidence.”
Myburgh said investors know that as Eskom sales decline along with its production, its revenue problems worsen.
Moody’s rating agency has downgraded the power supplier to junk status, with other agencies set to follow.
“The Eskom disaster has now become a brake on the economy and the only long-term solution will be to find new managers for the utility, preferably in the private sector. There comes a time when even governments have to admit to their failures and find a better way.”
She said in the meantime opportunities were growing for businesses to invest in solar panels and other forms of renewable energy to produce some of their electricity.
“As electricity tariffs rise the interest and investment in solar alternatives will grow and we expect to see a profound change in the whole energy landscape.”
Fedhasa (Federated Hospitality Association of South Africa) Cape said the association was not yet able to offer concrete estimates on the impact of load shedding.
At this stage they could only speculate, as it would include factors like back-up generators and tailoring hours to the load shedding schedule, which would have an impact on the projected loss to the industry.
Ian Cruickshanks, chief economist at the South African Institute of Race Relations, said load shedding would have an impact on the economy since foreign investment had three priorities: security of capital assets, a stable labour force and constant electricity supply.
“Load shedding knocks that on the head. If load shedding becomes a permanent feature, investors will not invest here.”
He said power outages would also affect this year’s festive spend because fewer people would shop and retailers who invested in generators for back-up would eventually pass on the cost to consumers since they were expensive to run.
Cruickshanks could not say how much revenue would be lost by load shedding, but the longer it lasted the more expensive it would be for the economy.
Dawie Roodt, chief economist at the Efficient Group, said going back to 2008, South Africa’s economy would have been 10 percent bigger than it was today had there been enough electricity.
The economy was losing about R300 billion a year.
About a million more people would also have jobs today if the country had sufficient energy.
South Africa was becoming less attractive to foreign investors.
Public Enterprises Minister Lynne Brown said yesterday that Eskom and South Africa should brace themselves for tough measures to make the power supply sustainable.
“We have to organise the country to attack these problems… Failure is not an option,” she said at Eskom’s Megawatt Park in Joburg.
Eskom released its interim financial results for the period ended September 30, painting a bleak picture for the state-owned company’s liquidity.
Its six month year-on-year profit was reduced to R9.3bn, with a projected year-end profit of half a billion rand.
Meanwhile, municipal debt to the power producer rose to R4bn.
The National Energy Regulator of SA (Nersa) approved tariff hikes that would provide an additional R7.8bn for the financial year 2015/16.
In addition, the government pledged a support package, which included an equity cash injection of R20bn.
Eskom chief executive Tsholofelo Matona warned that the company’s bleak financial situation, coupled with the operational problems resulting in recent power cuts, meant the power producer faced “a very untenable situation”.
“We have a crisis on our hands. We know where the problems are… we know what some of the solutions are, but for the period ahead we are living on the edge.”
Matona said a number of factors had contributed to Eskom’s reduced profits, including increased coal costs, the use of more diesel in open gas turbines to support the national power grid, and declining sales.
Nersa has also granted an 8 percent tariff hike, while the power producer had asked for 16 percent.
Matona welcomed the government’s support package.
“We think it will help relieve our immediate financial challenges for the next three years.”
Eskom had put in place an “aggressive” savings target of R60bn to demonstrate “we are helping ourselves”, he said.
It was also working with the government to find ways to recover billions of rand in debt from municipalities. - Cape Argus