Once a global leader and the continent’s leading energy producer, in a little over a decade South Africa’s electricity public utility has fallen into a pattern of disrepair that was once unimaginable.
The country saw its first blackouts in 2007, at a cost to the economy of just under US$1 billion. By 2019, the electricity lost to load shedding* had escalated to 1,352 gigawatt hours (GWh) and a total of 530 hours, up from the 176 GWh shed in 2007.
Load shedding is structured incrementally, increasing from Stage 1, where 1,000 megawatts (MW) are removed from the grid, up to Stage 8, where up to 8,000 MW would be shed. South Africa hit Stage 6 in 2019, its highest stage yet, with 6,000 MW taken off the grid at a time.
These losses come at a cost. Energy analyst Chris Yelland has calculated that each stage of load shedding cost the South African economy R1 billion (US$60 million) per day, per stage. For example, a day spent at Stage 3 load shedding would lead to a loss of R3 billion (US$180 million) over the 24-hour period. In 2019 alone, South Africa’s electricity instability cost the country somewhere between US$3.6 billion and US$7.2 billion.
South Africa still accounts for nearly a third of the continent’s installed capacity
The paradox of the South African case is that the country has increased its shortages tenfold over the past decade and increased its energy insecurity, yet it still accounts for nearly a third of the continent’s installed capacity, with about 52 gigawatts (GW). Relative to its local neighbors, South Africa is still doing fairly well with regard to government-provided energy supply. However, that’s not the neighborhood it’s trying to compete in, and that’s also not the system its economy was designed for.
The South African economy was built on an alliance between cheap energy and mining. Eskom’s initial model of operation prioritized the security of energy supply at all costs. This changed in the 1980s when the National Party government removed the organization’s internal capital development fund and increased Treasury’s oversight of new investments. Reforms introduced in the 1990s created further confusion in the decision-making process around new capacity, and the problem remains unresolved more than twenty years later. So, while there has been awareness since 1998 of the impact of Eskom’s ageing infrastructure, to date, no credible plan has been provided to address it.
The public utility is now characterized by ageing, poorly maintained infrastructure and severe delays in the construction of its new power plants.
COVID-19 has provided some relief in terms of demand
Eskom started 2020 in poor form: by the end of January, it had already shed 143 GWh, nearly as much as the 2007 total. The COVID-19-induced lockdown, introduced in late March, reduced electricity demand significantly and led to a decline in outages. This trend began to change as the economy started opening up in June, leading to a series of blackouts.
Although COVID-19 has provided some relief in terms of demand, it has also thwarted some of the long-term maintenance plans set out my Eskom. The public utility had previously scheduled to take 2,000 MW off the grid for nine months to do a full rebuild from July 1. However, travel restrictions caused by the pandemic have limited access to scarce technical skills and resources to pursue the detailed maintenance.
In mid-July, the German Embassy, working together with the Ministry of International Relations and Cooperation and the South African–German Chamber of Commerce and Industry, chartered a Lufthansa flight to bring a team of German technical experts to South Africa. The experts, invited by German businesses operating in South Africa, are expected to provide technical expertise that cannot be found locally, such as upgrading high-tech production facilities in the Eastern Cape, and supporting Eskom in the maintenance and upgrade of its power plants.
According to the first issue of the 2020 OECD Economic Outlook—a biannual analysis of major economic trends and prospects—South Africa’s economic trajectory in a post-COVID-19 landscape will be heavily impacted by its ability to address the structural issues of its economy, notably the rising costs and instability of electricity supply.
Over the past few years, Eskom has flirted with a number of technologies in an attempt to stabilize the grid, including nuclear, but it is uncertain where the country’s next major energy investment will be. Thus far, the only independent producers to provide power to the grid are those under the Renewable Energy Independent Power Producer Procurement (REIPPP) program: 6,329 MW of renewable energy has been procured to date, of which 3,876 MW is currently connected to the grid.
South Africa faces a choice in the near future: either feed more power into the grid, or create an economic system less reliant on a centralized electricity provider.
* Load shedding describes the process of strategically cutting power to specific areas in order to stabilize the grid when demand outstrips supply.
Nchimunya Hamukoma is an economist and policy strategist (@N_Hamukoma).