The third quarter of 2014 saw South Africa’s business competitiveness come under further pressure with the announcement by Eskom – the state-owned electricity company – that it was beginning a program of rolling blackouts that it called ‘load shedding’.
A program of renewal for South Africa’s power infrastructure is already underway, but experts warn that consumers and businesses alike must endure blackouts over the next couple of years while replacement power plants are completed and connected to the grid.
The biggest source of difficulties for Eskom has come from trying to match local demand for electricity from its aging coal stations, which are hugely over-subscribed. It comes at a time when Nigeria has overtaken South Africa as the number one economic power on the African continent, largely because of huge losses by South African business in the fourth quarter of last year.
Eskom has been trying to meet demand through the use of expensive diesel generators, and has had to ask for a 50 billion rand handout from the government to help offset those costs. The government is now thinking of asking private investors to step into the gap by creating independent power stations and generators – a move that may enrage labour unions.
The pending legislation would allow independent power companies to sell directly to the national power grid. Such independent suppliers currently account for around five percent of existing power supplies, and it is hoped that this number would soon rise. Independent analysts are not sure that this would create a quick fix to the load shedding program, but Jacob Zuma’s government may choose to overlook labour union reactions and push the new legislation through.
Eskom isn’t alone in its problems. Two other companies have just been identified by the government as being about to come under direct control: the postal service and South African Airways. The South African Chamber of Confidence has labelled the current slump in business confidence as “a matter of grave concern.”