How load shedding is tearing through South Africa’s economy

 ·21 Sep 2022

The latest high-level rolling blackouts in South Africa are taking its toll on various fundamental sectors of the economy.

Eskom announced further load shedding on Wednesday (21 September) at stage 5. The power utility said that it is necessary to continue at stage 5 to limit the use of the emergency generation reserves.

The country’s economy is facing an unprecedented scneario with load shedding not only impacting food security and mobile networks, but business sectors and industries at large.

Earlier this month (6 September), Stats SA reported that the country’s gross domestic product decreased by 0.7% in the second quarter of 2022 – much of this decline was attributed to rolling blackouts which hobbled economic output.

The Bureau of Economic Research noted this week that the current round of load shedding is likely to have a similar impact on the nation’s GDP in the third quarter.

“The intensity of the current power cuts threatens the GDP recovery from the 0.7% q-o-q contraction experienced in 2022 Q2. It also serves as another reminder of the urgency to fast-track increased private sector power generation, including securing funding for this,” said the BER.

Alexforbes chief economist Isaah Mhlanga said Eskom’s prolonged stage 6 load shedding has already caused significant damage to the country’s economy, with over R4 billion wiped from the GDP for each day it continues.

If it were not for Eskom’s failings, the country’s economy could be between 8% and 10% larger, said Francis Stofberg, senior economist at the Efficient Group.

But aside from the damage done to the economy in general, specific sectors are now sounding alarms over the harm caused by Eskom’s load shedding.

Small business in trouble

Speaking to The Money Show on 702, director at Trade and Industrial Policy Strategies Saul Levin said that small businesses in the country are being heavily impacted by load shedding – more so than their larger counterparts.

“Small businesses are usually on the municipal grid, not Eskom’s grid, so they can’t even negotiate special deals like big business can,” he said.

He noted that the SME sector experience load shedding “with the rest of us”, and typically can’t afford backup generators or the solar system installations that bigger businesses can install to mitigate the impact of power outages.

On top of this general vulnerability, Levin said that load shedding also carries a huge cost for SMEs.

There’s the cost of downtime, the cost of business disruption – up to three times daily, and many businesses are at high risk with their equipment, so maintenance costs also escalate, he said.

Levin said that following the Covid-19 pandemic there has been a pick-up in small business activity in the country, with the hope of resurgence – but the current electricity crisis does not help, he said, as SMEs lack the necessary support structures to take the hit.

Mobile networks

Large-scale network providers are also being hit in all directions by severe load shedding and related battery theft – threatening their reliability and elevating costs.

Speaking to ENCA, Stuart Perry, a science and technology engineering specialist, said that mobile towers need roughly 12 hours to recharge their batteries, but load shedding is making it more difficult for them to keep up connectivity.

Perry noted that above stage 2, it becomes difficult for mobile networks to manage as their battery backups and emergency reserves are relied on further.

He said large-scale network providers like MTN are burning 400,000 litres of fuel to keep their towers running and ensure they have time to charge emergency backups.

Network towers are interlinked; you may get a signal from a neighbouring one, but if they are susceptible to further load shedding, connectivity could take a hit, said Perry.

MTN’s executive for corporate affairs, Jacqui O’Sullivan, said that mobile operators manage to keep networks stable by spending billions of rands on batteries.

She told SAfm that it is vital for MTN to ensure it has enough “backup to the backup”, having deployed more than 2,000 generators to keep its towers online when the batteries die.

Perry noted that load shedding is not the only problem facing mobile networks. There has been an increase in battery theft where criminals are targeting mobile towers, often located in remote areas.

Vodacom told MyBroadBand that local mobile network providers lose hundreds of millions of rands worth of damage to their stations every year due to theft and vandalism, which ultimately impacts the cost of mobile services.

Perry added that with consistent load shedding, if the costs associated with keeping connectivity stable continue to rise, they may reach a point where it becomes too expensive for mobile networks, and they would be forced to pass the cost onto the consumer.

“Businesses are there to make money, but at some point, if it becomes more expensive, then – yes, costs will go to the consumer.”

Food security

Christo van der Rheede from AgriSA, an agricultural policy group, told ENCA that there are now serious concerns about the availability of fresh and consumable food in South Africa because of the recent load shedding.

Farms across the country have been forced to adapt to a ‘new normal’, with workers sometimes having to irrigate farms at night, rescheduling time slots for operations and trying to maintain cold storage systems that are crucial for preserving the freshness of foods.

Van der Rheede specifically stressed the issue of cold storage both within local and export markets.

He said farms have to replace compressors as a result of power surges. Regions such as Joburg and Pretoria have big riping facilities that harvest avocados, bananas and other fruits – if there is no cold storage, farmers might as well throw their produce away, he said.

Concern over the ‘cold chain‘ has been around since July this year, with AgriSA saying that extended periods of load shedding have threatened the viability of the sector.

The organisation noted that the farming sector had been affected by load shedding in instances such as:

  • Contributing to inflation that may result in farmers planting less due to rising costs;
  • Causing disruptions in planting schedules;
  • Increasing the cost of production; and,
  • Increasing overall risk and causing more uncertainties.

“Electricity is central to modern farming practices, and the recent increase in load shedding has seriously disrupted farming operations. Pumping stations, irrigation, cooling and other systems all depend on power supply,” said AgriSA.

The silent costs

CEO at Pan-African Investments and Research Services, Dr Iraj Abedian told 702 that load shedding also carried a host of ‘silent’ costs to the economy.

There is no way to quantify the damage done by load shedding, he said, because the numbers and models simply cannot estimate what could have been, had load shedding not existed or had been dealt with expeditiously.

Some of these ‘silent’ costs to the economy include:

  • Tens of thousands of jobs are lost as a direct result of load shedding;
  • Hundreds of thousands of jobs could have been created had load shedding not happened;
  • South Africa’s reputation globally;
  • A loss of confidence by the citizens in the government;
  • The loss of skills and expertise due to emigration.

“It’s not just energy that has been allowed to degenerate to this level of dysfunctionality and disruption and damage,” Dr Abedian said. “Increasingly, our rail is the same, our ports are the same. That’s pretty disastrous. A turnaround is needed badly, and there should be absolutely no talk – only action.”

Read: New inflation data is bad news for food prices in South Africa

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