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CGD in the News

South Africans left in the dark as blackouts return (The National)

February 22, 2019

From the article:

Cape Town // It was almost possible to hear a collective groan of "not again" rattle around South Africa as the country was once again hit by rolling electricity blackouts.

Around February 4, a balmy summer's Sunday, which most South Africans use to kick back with family and friends, the state energy utility Eskom announced blackouts would be implemented over the next week. And, it said, these would be "Level 4" power cuts, the most serious level before a complete nationwide electrical cut-off.

As Monday rolled around and the markets came on line, the South African currency the rand had its worst week in more than a year, breaching the crucial 14 to the dollar level over the next few days, losing almost 5 per cent against the greenback in total. The economic knock-on of the rand’s fall will be felt quickly, as fuel prices are set to soar.

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A report last year by the Centre for Global Development found that In some of the continent’s largest economies like Nigeria, Angola, and Ghana, more than 25 per cent of businesses lose double-digit sales due to power outages - with some firms averaging losses of 31 per cent.

Vijaya Ramachandran, the study’s lead author and a senior fellow at CGD, said: “We found that unreliable power can have a major impact on businesses, dampening their growth prospects and undermining job creation opportunities.”

South Africa has a dire unemployment problem but, unlike most African countries, it does not have the peasant-culture that allows people to become independent food producers outside the formal cash economy. Most, therefore, depend on jobs to earn cash money in order to survive.

The economy grew only about 1 per cent in 2018, latest government data shows, and it is economic consensus that South Africa needs 5 per cent growth to achieve job creation.

“An electricity crisis soon becomes a governance crisis, since all services depend on electricity,” says Johannesburg based author and artist Sizwe Mpofu Walsh. “An electricity crisis also soon becomes an economic crisis, since power and production are linked.”

Eskom itself though will probably have to shed jobs. The company’s own figures show that in 2003 it employed 32,000 people; today that number stands at 47,600, while still producing about the same amount of electricity.

Getting the unions, and even the bulk of the ANC itself to be on board with desperately needed changes to Eskom’s structure will be the defining task facing Mr Ramaphosa’s presidency, if he wins the upcoming elections as expected.

Should he fail, so will Eskom and with it, sub-Saharan Africa’s only industrial economy.

 

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