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Rolling Blackouts Taking Toll on S. African Economy

FILE - A man walks past electricity pylons as he returns from work in Soweto, outside Johannesburg, May 15, 2012.

South Africa's businesses and households have been crippled as the country's sole power utility, Eskom, intensified controlled power-cuts in an effort to prevent a total collapse of the grid. For nearly a week the state utility has intermittently reduced power supply by as much as 4,000 megawatts.

Eskom CEO Tshidiso Matona said Monday South Africans should brace themselves for another 18 months of power supply troubles.

Three weeks of tight electricity supply culminated in rolling blackouts during the weekend, which Eskom says were attributed to the utility neglecting to order enough diesel to fire emergency gas turbines used to generate power when the system is stressed.

Monday’s announcement riled businesses and residents who are beginning to count the cost of the worst case of controlled power cuts they have seen.

Impact on small business

Johannesburg coffee shop manager Corrine Jones says the business has been engulfed in darkness every night for the past four days, forcing staff cuts as customers go elsewhere. Profits on Saturday night, she says, were down by half.

“It is affecting jobs, it is affecting business, it is affecting customer service," said Jones. "We bake at night, so it affects our baking. If my bakers can not be baking between 6 and 10, then what is the point in having the staff between 6 and 10? What is the point in keeping those bakers on?"

FILE - The cooling towers at Eskom's coal-powered Lethabo power station are seen near Sasolburg, South Africa.
FILE - The cooling towers at Eskom's coal-powered Lethabo power station are seen near Sasolburg, South Africa.

Eskom, which supplies more than 95 percent of the country’s power, has intensified managed blackouts as delays in new plant openings stretch its aging 27 plants to breaking point.

South Africa’s power infrastructure has suffered from mismanagement and under- investment. Producing electricity below cost is financially unsustainable Eskom says, and partly to blame for the outages.

Matona told journalists, “We have run our plants very hard, and not having done proper maintenance in the past has now come to haunt us.”

Heavy toll on industrial sector

Some analysts estimate the blackouts have reduced economic growth significantly, costing the economy $44.4 billion since 2008. The retail, automotive and manufacturing sectors in South Africa have been hardest hit say economists.

The Steel and Engineering Industries Federation of Southern Africa said that power outages were “totally unacceptable." The federation estimates the crisis has cost the metals and engineering sectors $520 million. The federation says poor power supply is likely to damage South Africa’s reputation as an investment destination, causing “untold harm” to the economy.

The Energy Intensive User Group of Southern Africa, represents the 32 biggest electricity consumers who use 41 percent of South Africa’s electricity.

Group spokesman Shaun Nel says the power crisis is hurting investment.

“The lack of capacity means that any expansion plans are being put on hold, and the impact that these blackouts are going to have on the future means that any future investments plans are also being put on hold ... there has been a significant slow-down in future investment planning as well as capacity planning on the current capital that has been deployed,” he said.

The National Union of Metalworkers of South Africa, says industries relying heavily on electricity are contemplating cutting costs by laying off employees and the working classes and the poor will be the hardest hit by the power cuts.

Electricity will continue to be intermittent until the Medupi and Kusile power stations start producing. Medupi is expected to be on line in January, but full power production from both plants could take up to 18 months.