In a nation already grappling with economic challenges, Eskom's decision to implement Stage 6 load shedding this week will be catastrophic for an already battered economy, experts have warned.
While the Minister of Electricity, Kgosientsho Ramokgopa at a press briefing today attributed this drastic measure to "ramped up maintenance", sceptics see a more sinister undercurrent.
The staggering R30 billion and counting spent on diesel this year alone paints a picture of an institution scrambling to keep the lights on, quite literally.
And this on the back of startling revelations by the National Treasury that there was budget deficit of R143.8 billion for July, the most significant since 2004, and far surpassing the R115.5 billion economists had predicted.
This gaping hole in South Africa’s finances, coupled with whispers of impending tax hikes, sets a grim stage for the average South African.
The question then arises: Is Eskom's decision to cut power an attempt to reduce its diesel expenditure, given the dire state of the national coffers?
Dawie Roodt an economist with the Efficient Group believes that the theory may not be too far off.
He said that while government and Eskom’s finances are separated, the two do converge as the State is often called to bail out Eskom.
“Eskom's financials are looking worse than expected. So the budget numbers are actually worse than budgeted numbers. While in the case of the State, the numbers are significantly worse than budgeted for. So the chickens will come back to roost for the Minister of Finance,” Roodt said.
Roodt pointed out that Eskom’s outstanding debt is about R450 billion and if Eskom keeps on burning diesel the way they are burning debt, then the outstanding debt will keep on going up.
“That will eventually spill over and be another bail out for Eskom from the Minister of Finance and that means less spending on things like for example, education, or they have to cut back on burning more diesel, which if they do, leads to higher stages of load shedding. And I think there's huge pressure on Eskom not to burn so much diesel because of exactly this reason. But that inevitably means higher levels of load shedding and weaker economic growth. This is a horrible negative feedback loop,” he said.
South Africa has experienced more load shedding so far in 2023 than than the whole of last year, and according to some estimates, as much as the 14 years prior to that combined.
The hardest hit sector is mining, which is set to halve the amount of tax it paid in 2022 to R50 billion this year. In 2021, the country collected R110 billion in tax from this sector.
South African Revenue Service Commissioner Edward Kieswetter said earlier this year that the revenue service would lose at least R60 billion this year because of load shedding, but it could lose as much as R160 billion. Kieswetter cited a CSIR report which estimates that the South African economy lost R560 billion because of load-shedding.
Busisiwe Mavuso, the CEO of Business Leadership South Africa, speaking at the Chamber’s Annual Ladies Breakfast this week urged the government to work with the private sector to address some of the urgent challenges facing South Africa.
She highlighted that she was encouraged by the current partnership pledge between business and the government, which is driven by over 100 CEOs from some of the country’s top companies.
“We are now seeing business stepping up to play a more meaningful societal leadership role to build a more positive national narrative. This initiative, whose commitment, stature and ability to marshal resources, would increase the country’s probability of success. As such, we have set up multiple operational and governance layers to ensure that the implementation of this is done in a structured way,” she said.
“Government may not have the fiscal muscle to lean against the energy crisis, it however does have the policy tools to deal with it. The recent delays that came to light regarding the processing of the Electricity Regulation Act Amendment Bill, were rather disappointing. The bill is an urgent piece of legislation that is central to the joint efforts of business and government to solve the electricity crisis. It will allow for the creation of a Transmission System Operator to manage the national grid and procure electricity from a competitive market. For business to continue investing its resources and energy into partnering with government to resolve this crisis, government needs to focus on getting the policy environment right,” Mavuso added.
For many businesses, this week’s stage 6 load shedding is a death knell. Production halts, services are interrupted, and revenue streams dry up. The ripple effect of this is felt across sectors, from manufacturing to retail, from tech startups to established corporations. Unemployment, already a pressing concern, is set to rise as businesses buckle under the strain of erratic power supply.
Furthermore, investor confidence, a crucial element for economic growth, is likely to plummet.
Who would want to invest in a country where the basic utility of electricity is not guaranteed? Economists say that South Africa's global competitiveness is at stake.