Blackouts have reduced the potential size of the South African economy by nearly a fifth since they were imposed around 2008, according to an energy specialist at Africa’s largest fund manager.
Outages can be expected every week this year, and if the underpowered electricity generation situation is not addressed, the outlook for economic growth will be bleak, Lungile Mashele, sector specialist for energy and infrastructure at the Public Investment Corp., told a conference in Johannesburg on Thursday (March 23).
The state energy company Eskom imposed a blackout for more than 200 days in 2022 and almost every day in 2022 because its old and poorly maintained plants could not keep up with demand. The central bank estimates that the energy crisis will shave 2 percentage points off growth this year.
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Mashele, whose organization manages R2.55 trillion, said disruptions affect everything from the timing of operations and chicken slaughter to mining production volumes.
“If we had focused on our problems in 2008,” the situation would be a lot better today, she said. “No power, no electricity – everything shuts down.”
Other current and potential consequences of the crisis that Mashele outlined in her presentation include:
Marginal underground precious metal mines may close, leading to lower export earnings and job losses. The quality and availability of the telecommunication network has been affected. Vodacom Group Ltd. has spent over R2 billion on batteries, while MTN Group Ltd. operated more than 2,000 generators and used more than 450,000 liters of diesel per month. Malfunctions lead to leaks in the sewer system. Insurance claims due to the blackouts rose 250% over the past year.
The International Monetary Fund said on Wednesday it has cut its economic growth forecast for South Africa for this year from 1.2% to 0.1%, largely because of the power cuts.
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“We are really in crisis from a growth perspective,” Annabel Bishop, chief economist at Investec Bank Ltd., said at the same conference.
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