South African Power Crisis Eases as Eskom Rushes to Fix Plants

JOHANNESBURG (Capital Markets in Africa) – South Africa’s energy crisis eased as state power utility Eskom Holdings SOC Ltd. scrambled to repair broken plants and supplemented supply using gas turbines and pumped-storage facilities.

Power cuts, known locally as load shedding, should be limited to 2,000 megawatts on Wednesday — down from a peak of 6,000 megawatts on Monday — and are expected to end next week, Eskom said in an emailed statement. The outages temporarily interrupted production at several mines, disrupted mobile-phone services and weighed on the rand.

“As the generating plant continues to perform at low levels of reliability, any unexpected shift, such as an increase in unplanned breakdowns, could result in a change in the load-shedding stage at short notice,” Eskom said. “We continue to ask customers to reduce demand.”

The rand gained for the first day in three, advancing 0.3% to 14.7464 per dollar by 10:10 a.m. in Johannesburg. Eskom, which supplies 95% of the power used in Africa’s most industrialized economy, has struggled to meet demand since 2005, due to its failure to properly maintain aging plants and invest in new ones. The latest round of outages was caused by simultaneous breakdowns at several facilities and was exacerbated by heavy rains that caused flooding and soaked coal stockpiles.

Cut Short
President Cyril Ramaphosa cut short a trip to Egypt to deal with the crisis and was briefed by Eskom’s management on Wednesday on what it is doing to address the supply deficit.

“As plausible as some of the explanations that Eskom is putting forward are, it’s really not sufficient,” Ramaphosa’s spokeswoman Khusela Diko said in an interview with SAfm radio. “We are supposed to ensure that we are on top of issues of maintenance and we are supposed to ensure that we are able to forward plan.”

The economy contracted an annualized 0.6% in the third quarter, and a failure to speedily address the energy crunch will raise the risk of it slipping into recession if gross domestic product data for the three months through December also show a decrease in economic activity.

The South African Chamber of Commerce and Industry, the country’s largest business group, said the effect of the outages was already devastating.

“We have received many complaints from businesses in the retail and other manufacturing sectors not being able to fulfill production schedules on sales orders during this critical period,” the chamber said. “The government’s promised plans in revitalizing the economy by building infrastructure and driving policies for industrialization will now come into question as energy is the biggest enabler for any of these plans to come to fruition.”

Additional Sources
While Ramaphosa has repeatedly said that Eskom is too big to fail, the government is now considering how to tap additional sources of power and reduce the nation’s reliance on the utility, Diko said.

“The biggest problem that the president has raised has been the fact that looking at Eskom, it really is holding the country to ransom,” she said. “The president has held that we need to look at some of these regulatory blockages and changes that need to be made to allow for additional generation capacity.”

Source: Bloomberg Business News