Nompumelelo Magwaza
BUSINESS confidence hit its lowest level in five months in December as power disruptions undermined sentiment, a report by the SA Chamber of Commerce and Industry (Sacci) showed yesterday.
Analysts said the confidence data suggested that the economy might see some serious headwinds as 2015 kicks off.
Sacci’s business confidence index (BCI) shed 2.5 points in December to 88.3 from 90.8 in November. The latest BCI is 3.6 points below the December reading of 2013.
The 88.3 is the lowest level since July 2014 when the BCI measured 87.9.
Energy supply
“Given the highest level of 122.1 for the BCI in December 2006, the present level remains a matter of grave concern,” Sacci said in a statement.
Sacci, which represents big and small businesses across the country, said power disruptions would keep a lid on growth, more so in view of what it called “an apathetic approach to economic challenges” facing the country.
“Sacci is concerned that the electricity shortages will cause the economy to stagnate at low levels of activity.
“Energy supply in South Africa has become a major drawback to economic performance. This mismatch between supply and demand and reserve requirement is causing load shedding. This causes substantial damage to business,” Sacci added.
Iraj Abedian, an economist at Pan African Investment and Research, said the level of the confidence index reflected the harsh reality of the environment facing business in the country, especially small to medium enterprises.
He said the confidence levels were likely to deteriorate further as the year progressed.
“At the same time commodity prices are not doing well, oil prices are falling, which means the prices of platinum, gold, iron ore and coal could further be impacted,” he said.
The economy remains dependent on the export of minerals and metals. Directly exported minerals and metals account for as much as 60 percent of all export revenue.
The release of the Sacci report coincided with renewed concerns about the ability of Eskom to provide an adequate and uninterrupted power supply as the embattled power utility struggled with a funding crunch, ageing infrastructure and rising demand.
Eskom was, at the moment, the single most effective way of undermining South Africa’s reputation from a business and investor point of view, Abedian said. “Not only has Eskom lost its ability, but it has also lost its credibility, in producing a reliable supply of energy to the economy,” he said.
In another power development, Eskom said the synchronisation phase of the Medupi power station’s first 800 megawatts (MW) unit was going to happen before June.
According to Eskom’s website, synchronisation is the process when a new power unit is connected to the power grid, so that its power is “perfectly aligned” with all the other units “and to generate and deliver electricity into the grid”.
Eskom missed its December 24 deadline, resulting in criticism from opposition parties, labour unions and business.
Media reports yesterday said the first test phase deadline was scheduled for June, but Eskom denied this.
However, Eskom spokesman Khulu Phasiwe said they were waiting for the green light from the engineers and technicians working on cleaning the boiler at the plant.
“Once the engineers are comfortable that the boiler is clean enough, we will synchronise. It is factually incorrect to say the first synchronisation of Medupi’s unit 6 will be in June.
“It is scheduled to take place in the first quarter of the year, meaning any time from now until the end of March,” Phasiwe said.
Phasiwe said they expected the first unit of Medupi to become “commercially operational” in June by generating 800MW of electricity that can be sold. This would be generated gradually and ramp up from the synchronisation phase.
Back to normal
The country’s power supply is expected to only get back to normal once the Medupi and Kusile power stations were fully operational – allegedly in the next 12 to 18 months.
Medupi has suffered delays and escalating budget costs.
Meanwhile, Eskom said one of its two generators that went offline on Wednesday at the Tutuka power station in Mpumalanga had been repaired and was producing power.
Phasiwe said a technical fault had caused the breakdown, but the generator had been fixed within hours.
One generator at Majuba had not been fixed as the engineers were still working on it, Phasiwe said.
Eskom said the risk of power cuts was low until Sunday. Additional reporting by Siphamandla Goge