Reserve Bank has a plan for total grid collapse in South Africa

 ·30 Nov 2023

The South African Reserve Bank (SARB) and the Financial Sector Contingency Forum (FSCF) are planning for the scenario of a complete national electricity grid shutdown.

This is according to the central bank’s latest Financial Stability Review published on Wednesday (29 November), which highlighted the observed developments in its mandate to protect and enhance financial stability in South Africa.

The SARB, through the FSCF, continued to plan for the improbable (but not impossible) scenario of a complete national electricity grid shutdown or another potential systemic event,” the report said.

“In line with the role and function of the FSCF, current efforts are centred on developing, coordinating and testing contingency plans to mitigate, as far as possible, the potential impact of such events on the financial system and the economy,” it added.

This essentially means the central bank is continuing its work on its contingency plans to ensure the country’s payments system remains in operation in the event the nation’s electricity grid collapses.

Concerns over a reliable power supply in the country have heightened as Eskom has ramped up power cuts in recent weeks.

On Thursday, Eskom announced that load shedding would be eased from the rotation of stage 5 (daytime) and stage 6 (nighttime) outages to a three-step schedule, moving from stage 3 during the day to stage 4 in the evening and stage 5 overnight.

Higher stages of load-shedding surprised many people since electricity minister Kgosientso Ramokgopa said Eskom’s performance has improved.

While energy experts warn that the minister’s optimism was misplaced and that South Africans should brace for more load-shedding, the SARB has also underscored load shedding and the fragility of the electricity grid as an ongoing concern.

Among other notable risks to the country’s financial environment, the SARB’s report included the government’s increasing debt levels and higher debt-servicing costs and domestic financial institutions’ high exposure to it.

Additionally, the implications of being on the FATF greylist started to materialise during the period under review, with growing evidence of domestic institutions being subjected to increased scrutiny by foreign counterparts, the SARB added.

“The long-term consequence will be the reduction of South Africa’s attractiveness as an investment destination. However, the risk is mitigated by the resilience of the financial sector, compliance with international regulatory standards and the efforts being made to address the adverse findings of the FATF by the February 2025 deadline,” the review said.

Despite these ongoing risks, the Reserve Bank noted that prudentially regulated domestic financial institutions, in aggregate, remained resilient, as measured by their ability to maintain adequate capital and liquidity buffers to absorb the impact of shocks.

“However, there are signs of increasing credit risk across the financial sector, which is being monitored closely,” it said.

Read: Eskom is on a slippery slope

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