President Cyril Ramaphosa described Eskom’s latest round of load shedding as quite a “shock”. He was speaking to journalists following the African Union heads of state summit on Monday, in Addis Ababa, Ethiopia.<\/p>\n
The president said that the fact that six power generating units went down on Monday, leading to stage 4 load shedding, was “most worrying, most disturbing”.<\/p>\n
“It shocked me and made me quite angry that we’ve reached this stage of dysfunctionality,” he said.<\/p>\n
The president said that Eskom is a risk, and needs to be addressed.<\/p>\n
“We have got all our energy eggs in one basket. When the generator of energy in our country reports that there are six units (down), it means that all six eggs are broken.”<\/p>\n
South Africans endured the most intense supply cuts in four years on Monday, while Moody\u2019s Investors Service warned that worse could be yet to come, Bloomberg reported.<\/p>\n
Moody\u2019s said that the state energy firm is a significant risk to South Africa\u2019s finances and president Ramaphosa\u2019s strategy to split the company into three does little to address its problems.<\/p>\n
The rand also suffered, and was the worst-performing major currency against the dollar Monday.<\/p>\n
\u201cNo modern economy can operate without power,\u201d said Mike Schussler, an economist at economists.co.za.<\/p>\n
\u201cIf we had stage 4 load shedding every day, it would take away 10% of the power of the South African economy.\u201d Eskom has about 40,000 megawatts of installed generating capacity.<\/p>\n
The president said that Eskom requires a new business model, to “minimise the risk, minimise our risk as a nation”.<\/p>\n
Credit-Negative<\/strong><\/p>\n Providing Eskom, which has R419 billion ($30 billion) of debt, financial support before taking measures to generate savings at the utility would be credit-negative for the country, Moody\u2019s said. The remedies would entail \u201cunpopular decisions\u201d on electricity tariffs, it said.<\/p>\n Power cuts may cost the country as much as R5 billion a day, according to the Organisation Undoing Tax Abuse, a civil-society group.<\/p>\n Regular supply interruptions are creating uncertainty that endangers businesses that are highly dependent on the utility, said Shaun Nel, a spokesman for the Energy Intensive Users Group of South Africa, whose members consume more than 40% of the nation\u2019s power and include Anglo American Plc.<\/p>\n \u201cWe\u2019re going to see companies close in the smelting industry,\u201d Nel said. Between already-high tariffs and the spectre of more supply cuts, the victims will be \u201csmall foundries and smelters that shut down and never come back,\u201d he said.<\/p>\n The country is Africa\u2019s biggest steel producer, and Eskom first throttles supply to industrial customers before cutting retail consumers.<\/p>\n Moody\u2019s comments are a reminder that major structural issues such as power insufficiency are serious constraints on the real economy and put pressure on public finances, said Piotr Matys, London-based emerging markets currency strategist at Rabobank.<\/p>\n \u201cThose issues pose a major challenge for president Ramaphosa\u2019s administration,\u201d he said.<\/p>\n Eskom board ‘uncomfortable’<\/span><\/strong><\/p>\n Eskom’s Board on Monday convened an urgent meeting with the company\u2019s executive management and the Minister of Public Enterprises, Pravin Gordhan. “This report on the causes, including all the challenges of the new and old power stations, was much of the deliberations between the Board,\u00a0 management and the Department of Public Enterprises in today\u2019s meeting that lasted for over to six hours.”
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\nThe company said that the escalation from stage 2 to stage 4 load shedding was caused by a further seven generating units that tripped within a period of five hours.<\/p>\n
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\nIt said that by Monday evening, four units had returned to service and it is expected that the remaining three will be back to service by Tuesday morning. “We will have a systems- and operations update within the next 24 hours,” it said.
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\n“The Board was provided with a detailed analysis about breakdowns in Eskom\u2019s new build programme and at its fleet of older power stations. The Medupi and Kusile power stations \u2013 the core of the new build programme \u2013 are continuing to show a lack of reliability to contribute meaningfully to Eskom\u2019s generating capacity, which is a serious concern.
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\n“The Board has resolved to institute an urgent review to establish when, realistically, these projects will be completed, the extent of design- and other operational faults, what steps can be implemented to minimise the ever-escalating costs and what can be done to increase output,” Eskom’s statement said.
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\nEskom chairman, Jabu Mabuza, said: \u201cWe remain uncomfortable about the stability of the generating system but will keep the country informed of our progress over the next few days in providing better assurance about electricity supply.\u201d<\/p>\n
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