Power cuts have reduced potential size of SA economy by a fifth, PIC says

Blackouts have reduced the potential size of South Africa’s economy by almost a fifth since they started being imposed around 2008, according to an energy specialist at Africa’s biggest fund manager.

Outages can be expected every week this year and if the inadequate electricity generation situation isn’t addressed the prospects for economic growth will be dismal, Lungile Mashele, sector specialist for energy and infrastructure at the Public Investment Corp., told a conference in Johannesburg on Thursday.

Read all our Eskom coverage here.

State power utility Eskom has imposed rotational blackouts on more than 200 days in 2022 and almost every day this year because its old and poorly maintained plants can’t keep pace with demand. The central bank has estimated that the energy crisis will shave 2 percentage points off growth this year.

Mashele, whose organisation manages R2.55 trillion, said outages are affecting everything from the timing of surgeries and the slaughtering of chickens to mining production volumes.

“if we had focused on our problems in 2008” the situation be a lot better today, she said. “No power, no electricity – everything shuts down.”

Other current and potential impacts of the crisis that Mashele laid out in her presentation include:

• Marginal underground precious metal mines may close, leading to lower export earnings and job losses.
• The telecommunication network quality and availability has been affected. Vodacom has spent more than R2 billion on batteries, while MTN has deployed more than 2 000 generators and uses over 450 000 liters of diesel a month.
• Outages are leading to sewage spills.
• Insurance claims due to the blackouts increased 250% over the last year.

The International Monetary Fund on Wednesday said it has reduced its economic growth forecast for South African for this year to 0.1% from 1.2%, largely because of the outages.

“We really are in a crisis from a growth perspective,” Annabel Bishop, chief economist at Investec, said at the same conference.

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