The ‘perfect storm’ that could cost South Africa billions – and threaten power supply

 ·21 Jun 2024

Cable theft has caused South Africa’s economy to lose billions of rands and exacerbated the country’s energy crisis. With global copper prices soaring, criminal syndicates may be motivated to increase their theft operations, threatening to increase these losses even higher.

Data from The Outlier shows that copper prices have reached new highs in the past month due to increasing demand for the metal and predictions of a future shortage.

Copper is vital in industries such as telecoms, power generation, and construction. It is used in broadband network wiring, transformers, and generators for power production.

The shift to renewable energy has further boosted the demand for copper. According to the International Energy Agency, each megawatt of wind and solar energy requires between 3 and 5 tonnes of copper.

Electric vehicles (EVs) also contribute to the demand for copper, using about 83kg per vehicle, compared to 23kg in traditional cars.

While recycling accounts for 35% of copper supply, it is insufficient to keep up with the increasing demand.

The IEA warns that by 2030, only 80% of the demand for copper will be met, leading to high prices as industries continue to expand and push for sustainable energy solutions.

Billion-rand warning for South Africa’s economy

While this price surge is good news for legitimate operations, it also benefits criminal copper syndicates running rampant across the country.

The economic impact of cable theft includes loss of productivity, increased security costs, and higher insurance premiums.

Research conducted by University College London and published in the Journal of Research in Crime and Delinquency indicated a significant positive correlation between lagged increases in copper price and copper cable theft.

In the UK, the report found a 649% increase in recorded cable thefts from 2005 to 2006 during the same time period in which copper prices rose considerably—almost double the cost per tonne for the previous year.

This means the risk of copper theft increasing is a significant concern for South Africa’s economy and businesses.

According to stakeholders in the impacted industries and economists, the approximate annual cost of copper cable theft is more than R47 billion.

This estimation was based on examining the economic toll on Eskom, PRASA, Transnet and the reduced productivity of the mining industry.

However, according to South Africa’s National Infrastructure Plan (NIP) 2050, the total cost of copper theft could exceed 1% of GDP annually, imposing an enormous financial burden on the taxpayers who largely foot the bill.

The threat to electricity supply

Cable theft has severely disrupted South Africa’s electricity supply, causing frequent power outages and damaging critical infrastructure.

Thieves target copper cables for their resale value, leading to significant repair costs and operational delays for utility companies.

This theft compromises the stability of the power grid, resulting in unscheduled blackouts that affect homes, businesses, and essential services.

The ongoing threat of cable theft exacerbates the country’s energy crisis, undermining efforts to provide reliable electricity and hindering economic growth and development.

In April 2022, Eskom and City Power said they had seen a surge in copper cable thefts, with incidents occurring up to five times daily.

It was estimated that the cabling removed carried a value of R60,000 at the time.

More recently, City Power CEO Tshifularo Mashava wrote to national police commissioner Fannie Masemola, calling for army intervention.

This came after criminal syndicates allegedly targeted copper cabling on the double-decker section of the M1 feeding the Braamfontein area, damaging several 88kV and 11kV cables, a gas line, and one oil-filled cable.

The resulting fire knocked out power to parts of Braamfontein, Parkview, Parktown, Melville, Amalgam, and Vrededorp.

It also threatened the recently relaunched open cycle gas turbine substation nearby. Mashava said R100 million had been spent refurbishing it.

The solution is also a problem

In November 2022, the Department of Trade, Industry, and Competition (DTIC) banned the export of ferrous and copper scrap to reduce infrastructure theft.

The purpose of the ban is to remove the market for stolen goods and decrease the price enough to discourage theft.

This ban was initially extended by six months on July 31 last year, and it is now being proposed to be extended for another six months.

However, this has caused further harm to legitimate businesses and the economy.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) has encouraged the department to consider the broader consequences of the decision and what is best for the industry in the long term.

They called for the lifting of the ban on scrap metal exports.

Seifsa’s chief operating officer, Tafadzwa Chibanguza, stated that the ban was ineffective in combating infrastructure damage and scrap metal theft.

Chibanguza also mentioned that the imposition of the export ban had caused more economic harm than good.

South Africa saw a 38% decrease in its scrap metal exports. As a net exporter, the country typically exports at least R4.5 billion worth of scrap metals every year.

The ban significantly impacted the scrap metal trade, affecting nonferrous metal exports in particular.

Specifically, exports of nonferrous metals such as lead, aluminium, and zinc experienced declines of 39%, 33%, and 17%, respectively.

Various alternative solutions and strategies, including enhanced regulation and enforcement, have been suggested to tackle the issue of scrap metal theft in South Africa and potentially lift the ban.

The country could introduce stricter regulations and enforcement measures to combat scrap metal theft.

This may involve mandating sellers to provide identification and proof of ownership for scrap metal transactions and imposing harsher penalties for illegal activities.

Read: Alarm bells for two of South Africa’s biggest employers

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