Risk experts sound the alarm over stage 8 load shedding in South Africa

 ·25 May 2023

The Institute of Risk Management South Africa (IRMSA) says that expected stage 8 load shedding in mid-winter in South Africa presents a grave threat to multiple sectors in the economy – and the knock-on effects could be disastrous.

The body warned organisations across all sectors to start taking action now to mitigate the fallout and to take the threat seriously – stressing that the load shedding situation is no longer ‘business as usual’.

“There are significant risks posed by the potential implementation of stage 8 mid-winter load shedding, announced by Eskom. This development, we believe, presents a grave threat to the country’s fragile economy and social fabric and calls for immediate action from risk managers across all sectors,” it said.

In its latest state of the system update ahead of the winter months (June to August), Eskom warned that there was a high risk of stage 8 load shedding being implemented as the utility battles to address a 6,500MW shortfall between supply and demand in the coming months.

While the group hopes to limit load shedding to between stages 3 and 5, it requires significant cooperation from the public at large to decrease demand. It will also have to limit its unplanned outages to below 15,000MW – something it has not been able to achieve this year consistently.

Without public cooperation – and if outages hit 18,000MW or more, as has been the case even outside winter demand – then stage 8 load shedding is likely, Eskom said.

IRMSA said that stage 8 load shedding represents a severe disruption to businesses, critical infrastructure, and security and exacerbates the livelihood risk.

Stage 8 load shedding would see the country thrust into darkness for 16 hours in every 32 hour cycle, effectively putting power out for half the day, every day. The cost to the economy will also ramp up significantly.

“The sustained power cuts at such an intensity will have far-reaching consequences on existing risk response strategies which will most likely fall short of providing alternative energy long enough to run ‘business-as-usual’,” IRMSA said.

“This will lead to significant financial losses, decreased productivity, and potential damage to essential equipment and machinery and communication.”

The risk experts warned that the next big impact will be on potable water supply and availability, which has already been hammered by current levels of load shedding.

The implications of Stage 8 load shedding are particularly pronounced for industries heavily reliant on uninterrupted power supply, such as manufacturing, mining, and telecommunications, the group said.

“South Africa’s economy, already grappling with numerous challenges, including the effects of the global pandemic, economic inequalities and extreme unemployment, cannot afford the added strain of stage 8 load shedding,” it said.

The potential direct consequences include:

  • Even higher unemployment;
  • Higher cost of living;
  • Decreased investor confidence;
  • Reduced foreign direct investment;
  • Decline in international competitiveness;
  • Small, and medium-sized enterprises risk business closures;
  • Increased socioeconomic hardships.

“Considering these risks, it is imperative for risk managers to take immediate and initiative-taking steps to refresh their business impact assessments, review the effectiveness of existing risk response strategies and business continuity plans, as well as building rudimentary scenario outcomes of the potential impact of stage 8 load shedding,” IRMSA said.

The group said that businesses need to get ahead of stage 8 load shedding by doing all they can to reduce their reliance on the national grid, communicating with suppliers and other stakeholders on their readiness for outages and keeping lines of communication open with clients, employees, suppliers and all other sectors of their operations about the crisis.

Earlier this week, business leaders warned that stage 8 load shedding is all but guaranteed and said that operation costs will rise significantly as a result.

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.

Read: Eskom workers demand 12% salary hikes and other benefits as stage 8 load shedding looms

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