Business interest group BLSA says that stage 8 load shedding is all but certain in the coming months, warning that companies relying on diesel to keep their operations going during outages will be hit even harder as the lights go out for as much as half the day.
According to Business Leadership South Africa (BLSA) chief executive Busi Mavuso, not only will record load shedding hit companies’ bottom lines, but the knock-on effect on the country through business confidence and investor sentiment will also be felt for some time.
“The impact on already weak business confidence is obvious. This is not the environment in which businesses are going to undertake new investments. That will feed into weaker overall economic performance with growth facing yet another setback,” she said.
Mavuso said that the bitter pill of stage 8 load shedding would be easier to swallow if there was any guarantee that this would be the worst outages the country would ever experience – but a lack of progress in resolving the wider energy crisis does not instil hope.
“The National Electricity Crisis Committee (Necom) last year pulled together the best minds on electricity and set out a plan to address the crisis as best we can, both in the short term and long term.
“Necom’s Energy Action Plan has had some successes…But key further steps are now mired in confusion and political contestation,” she said.
While South Africa has managed to make amendments to the Electricity Regulation Act to free up the private sector to build new generating plants at scale – and a request for proposals for battery storage has been published, with bids due in July – other measures have stalled or gone completely off track.
“For one thing, the Integrated Resource Plan (IRP), the roadmap for the entire energy sector, is meant to have been updated from the 2019 version but we are still waiting for the document to be released despite promises that we would get it in March,” Mavuso said.
“We are also meant to have made significant progress on the unbundling of Eskom’s transmission, distribution and generation units, largely to set up an independent system operator. Requests for proposals for new gas power generation were also meant to have been launched.”
Mavuso said that these missed opportunities and the glacial pace of energy reform make it difficult for businesses to bank on or trust in any resolution coming soon.
“The painful experience of Stage 8 would be easier to endure if we had high confidence that it was the low point in our electricity recovery plan,” she said. “Instead, the plan is being buffeted from various sides, apparently unmoored from its political anchors.”
Instead of sticking to the plan, ministers in charge have gone rogue. Mavuso noted that minerals and energy minister Gwede Mantashe has announced an RFP for 2.5GW of nuclear power will be launched by the end of this year – this was not part of any plan.
Electricity minister Kgosientsho Ramakgopa has also departed from any plan with new talk of extending the lives of Eskom’s coal plants, in conflict with transition plans that have already been agreed upon.
“Global funders have taken note of the shifting goalposts, threatening the just energy transition partnership that was formed at COP26 to raise $8.5 billion of funding for South Africa’s transition. These missteps are going to be harder to bear as stage 8 is implemented,” she said.
Meanwhile, stage 8 load shedding implies half of the day will be without electricity, and businesses continue to suffer greatly.
For companies running diesel-powered generators during outages, consumption is likely to spike, creating logistics and storage challenges, as well as extensive costs.
“Already the cost of dealing with load shedding is a major driver of inflation and is doing serious damage to the profitability of companies. This will require extensive contingency planning by businesses across the country,” Mavuso said.