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Wildcat strike at Eskom set to hit economy hard

Pylons carry electricity from South African power utility Eskom's Koeberg nuclear plant near Cape Town. Photo, Reuters.

Pylons carry electricity from South African power utility Eskom's Koeberg nuclear plant near Cape Town. Photo, Reuters.

Published Jun 27, 2022

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South Africa’s tentative economic growth for the second quarter has been left in tatters as Eskom ramped up its rotational power cuts to a higher level after workers downed tools at nine power stations.

The struggling power utility on Friday implemented Stage 4 power cuts – stepped up from Stage 2 – throughout the weekend, due to the ongoing unprotected labour action.

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Thousands of Eskom employees have embarked on unprotected strike action following a deadlock in wage negotiations on Tuesday.

The power utility said it was compelled to take precautionary actions to conserve emergency generation reserves as many activities at power stations had to stop, including the manual loading of coal.

Eskom workers are demanding 15 percent wage increases across the board on a one-year agreement, a R1 600 increase in the housing allowance, and closing of the apartheid wage gap.

There have also been reports of intimidation against some workers who reported for duty, as well as alleged attempts to force employees out of power stations.

However, the Labour Court granted Eskom an urgent interdict against the wildcat strike on Friday.

Eskom chief operations officer Jan Oberholzer warned that the workers' strike and acts of intimidation could possibly increase the risk of power cuts amid low reserves of water and diesel at the peaking plants.

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“This is an illegal strike and should any of our employees or colleagues conduct themselves in a way that is not appropriate, we will take the necessary action. We have a disciplinary process,” Oberholzer said.

This is the second time Eskom has implemented Stage 4 power cuts in as many months, after the country plunged to this level on May 21 when higher than anticipated demand caused some units to trip.

Eskom has been experiencing frequent breakdowns at its coal-fired generation units due to low maintenance, resulting in a low energy availability of 61 percent of the total installed capacity.

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Alexander Forbes chief economist Isaah Mhlanga said South Africa’s electricity crisis will continue plaguing the economy for as long as the energy mix is not properly balanced with renewable energy.

“We expect load shedding to continue well into 2023, given the first phase of renewable energy projects,” Mhlanga said.

“The Department of Minerals and Energy expects the recently licensed distributed generation projects to be completed at the end of 2023.”

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Economic activity, especially in the productive sectors such as manufacturing and mining, remained subdued in the second quarter, mainly due to the country's ongoing power crisis and flooding in KwaZulu-Natal.

According to Statistics South Africa (Stats SA), mining production fell more than expected in April, slumping by 14.9 percent after a downwardly revised 7.5 percent fall in March.

Manufacturing output also fell for the second consecutive month in April, plunging by 7.8 percent following a downwardly revised 0.6 percent decline in March.

FNB chief economist Mamello Matikinca-Ngwenya said all this threatened to reverse first quarter gains, when South Africa’s gross domestic product (GDP) returned to pre-pandemic levels after expanding by 1.9 percent.

“There was general economic weakness at the start of the second quarter amid the severe impact of the flooding in KZN and load shedding,” she said.

“Though a domestic technical recession is not our base case, the probability of a recession has been increasing over the past few months.

“While a quarterly GDP decline looks inevitable in the current quarter, we do not expect it to be sustained into the third quarter.”

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