South Africa’s intensive consumers of electricity have expressed growing concern over the potential impact of heightened power cuts on production and economic growth as they are on the last push before the end of the year.
Eskom is implementing stage 4 load shedding, after withdrawing stage 5 in the evening, due to the high levels of breakdowns and the depleted emergency generation reserves.
The struggling power utility has revealed that all its open-cycle gas turbines (OCGT) have ceased operation due to the inability to buy more diesel after exhausting at least R12 billion on diesel to keep the lights on, more than double its annual budget for diesel.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said yesterday that the energy intensive users were heavily reliant on Eskom given that the cost of investing in alternative energy sources to meet their consumption was prohibitive.
Seifsa said that these producers were therefore affected by load curtailments with adverse implications for production.
The metals and engineering sector is comprised of energy intensive consumers of electricity in the upstream of the value chain, as well as relatively less energy intensive consumers downstream.
Seifsa chief operating officer Tafadzwa Chibanguza said the metals and engineering sector recorded a contraction in production of 1.3% in the second quarter where the country recorded 1 117 gigawatt hours of load shedding.
Chibanguza said this decrease in production can largely be attributable to the impact of load shedding.
“We therefore view the fact that the country experienced 2 690 gigawatt hours of load shedding in the third quarter, double that of the second quarter, with grave concern for the prospects of production,” Chibanguza said.
“And the fact that Eskom has indicated a worsening electricity situation is an even greater cause for concern. At this stage we are still running our simulations, but all indications are that the sector will contract from manufacturing in the third quarter.”
South Africa experienced its worst month of load shedding in its history in September, and October was characterised by a crippling strike at the state-owned logistics enterprise, Transnet.
According to Statistics SA, mining production fell for an eighth straight month by 4.5% year-on-year in September, mainly due to the ongoing power supply disruptions.
The Department of Public Enterprises said on Sunday that the government and Eskom would work on a solution to find the money for diesel by looking for savings within existing Eskom funds.
The energy crisis has already forced the minister of finance to reduce South Africa’s economic growth forecasts from 2.2% to 1.9%, attributing this primarily to load shedding.
There are also severe implications for the agricultural sector and food security as there are now serious concerns about the availability of fresh and consumable food because of load shedding.
Business Unity South Africa (Busa) CEO Cas Coovadia said the power crisis had led to loss of confidence in the government among citizens.
“We can only repeat what we have been saying very often. The load shedding has had a very negative economic impact. The impact on SMEs in particular is severe,” Coovadia said.
“There are also severe issues for mobile service providers. An expert in this area recently indicated large-scale network providers are being hit in all directions by severe load shedding and related battery theft – threatening their reliability and elevating costs.”
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