Electricity load-shedding will halve GDP growth this year and cost the country 275,000 in potential jobs, say analysts at professional services firm PwC.
In a research note this week, the group said that South Africa experienced 859 hours of load-shedding in 2020.
“According to PwC’s calculations, this cost the country an estimated R75 billion in lost GDP and an additional 450,000 in job losses. Put differently, last year’s 7% decline in real GDP could have been limited to around 4.7% were it not for Eskom power delivery failures.”
In recent months, PwC said that its baseline scenario included an assumption that the economy will face a similar volume of load shedding hours this year compared to 2020.
“This assumption still appears valid: electricity outages totalled 560 hours in H1 2021 which was close to the 576 hours recorded in the first half of last year.
“While a notable proportion of the recent power outages were experienced outside of business hours, the number of load-shedding hours in H1 2021 can be equated to the loss of 70 (eight-hour) working days.”
PwC estimates that load shedding will reduce real GDP growth by 2.3 percentage points in 2021. This could cost the country 275,000 in potential jobs.
“In other words, if South Africa did not experience, load shedding, real GDP growth could have been 4.6% under our baseline scenario, with up to 565,000 jobs recovered.”
In June, president Cyril Ramaphosa announced that the requirements for the private sector to obtain a licence for own power generation had been relaxed, with the official change to be made in a government gazette within the next two months.
The belated announcement follows sustained pleas from the private sector, including several business groups, that the threshold should be raised to 50MW.
Ramaphosa has gone further than this and raised the threshold to 100MW.
The cumbersome and costly licencing process for own generation is seen as a major deterrent to bringing much-needed additional generation capacity onto the national grid.
According to Ramaphosa, firms will also be allowed to sell any excess power generated back into the grid. However, it could take more than a year to see the effects of the change, says economists at the Bureau for Economic Research (BER).
“In terms of the impact on the economy, it is important to realise that own generation (renewable) projects can take up to 18 months to complete. This does imply that periodic load-shedding is likely to remain a feature of the South African landscape in the foreseeable future.”
The South African Photocatalytic Association estimates that the lifting of the licensing cap could add up to 5,500MW of additional power over the next two years.
In addition, the Minerals Council said that its members could add 1,600MW to the grid over the next three years.
“The key message here is that in line with our thinking since the end of 2019, there is scope to be more optimistic about the prospects for the South African economy beyond 2022,” the BER said.