Eskom’s electricity cuts may pull the plug on improved business sentiment
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POWER utility Eskom yesterday dampened a buoyant business mood, implementing stage 4 load shedding just hours after the South African Chamber of Commerce and Industry (Sacci) said business leaders had expressed their highest level of confidence in trading conditions in three years.
Sacci warned the blackouts could affect business sentiment as an improved business climate and rising exports boosted its confidence index.
Investec’s chief economist, Annabel Bishop, said industries trying to localise production were likely to suffer from the insufficient supply of electricity to meet demand.
“Load shedding is likely to get worse as demand escalates with the economy trying to recover quickly but being held back by slow or insufficient state provision of necessary services to the private business sector,” she said.
The electricity, gas and water sector had already shown signs of struggling to cope with power cuts in the first quarter, contracting by an annualised 2.6 percent during the period.
Sacci said the Business Confidence Index (BCI) rose to 97 last month from 94.7 in April. Business confidence reached its highest level since March 2018, mainly attributed to higher export volumes and manufacturing.
Sacci chief executive Alan Mukoki said South Africa’s export-led recovery should provide room to address some of the structural deficiencies in the economy, particularly rising unemployment. “It remains important to continue to assure investors that South Africa remains an attractive investment destination,” Mukoki said.
Eskom yesterday ramped-up its blackouts to stage 4 for eight hours for the first time this year because of additional breakdowns of power generation units amid high winter demand.
FNB economist Thanda Sithole said activity in the electricity, gas and water sector will be interrupted by continued planned and unplanned maintenance of Eskom’s power plants.
“As load shedding continues, this poses a risk to water supply and internet connectivity, with implications for overall economic activity,” Sithole said. This comes as the economy was starting to show signs of a robust recovery, with the first-quarter gross domestic product (GDP) recording a 4.6 percent annualised growth rate.
Eskom yesterday said it had breakdowns totalling 15 087 megawatts of capacity, while 1 273MW of capacity was out on planned maintenance.
Spokesperson Sikonathi Mantshantsha said “these capacity constraints will continue for the foreseeable future” as the utility battles its ageing fleet of coal-fired power stations.
Meanwhile, the RMB/BER Business Confidence Index also recovered noticeably in the second quarter, jumping by 15 to 50 points after declining by five points in the first quarter.