News in South Africa 12th January:

1. Load shedding to damage infrastructure:

Raised levels of load-shedding are a crisis for the Tshwane municipality, affecting the condition of its electricity network and its ability to attend to outages.

Load shedding to damage infrastructure
Photo by Wendelin Jacober

City of Tshwane MMC for utilities and regional operations Daryl Johnston made this comment on Wednesday after Eskom announced it will implement stage 6 load-shedding in the evenings.

Eskom announced that stage 6 will be implemented indefinitely until further notice after more generating units were affected.

“Stage 6 load-shedding means that rolling blackouts will affect regions of our city two to three times a day for a total time without electricity at a minimum of six hours per day.

“Our networks were never designed for load-shedding and continuously turning the network on and off has a major impact on the condition of our network infrastructure,” Johnston said.

He said residents were already aware that load-shedding could result in additional outages due to overloading of the network, as well as vandalism and theft of the municipality’s infrastructure.

“However, as the frequency of load-shedding increases, city resources will be stretched by just switching areas on and off.

“The same teams needed to perform this switching also play a critical role in electricity network repair and maintenance work, and they will have significantly less time available to work on restoring electricity for non-load-shedding related outages,”  Johnston said.

Johnston requested residents to help the municipality manage this difficult time.

“Please turn off your appliances during load-shedding, leaving only a light on to let you know when the power returns, and only then turn your appliances back on after some time has passed (10 to 20 minutes).

“The surges generated as power is turned back on causes areas to trip minutes after having been restored, causing extended outages in some areas.”

2. Economy failing without power:

Less damage to the economy will ‘pay’ the fuel bill for load shedding in under a week every month.

The economy is reeling from near-constant load shedding. These rotational blackouts are an enormous constraint on growth, and businesses (and households) are being forced to incur extra costs to keep productive.

In some cases alternative supply is largely unfeasible, resulting in things like significant production declines at the country’s largest steelmaker, similar issues at our mines, and even challenges with chicken supply which led to the forced closure of 70 KFC outlets last month.

For small businesses, the costs are even more severe.

And this disregards the lost output because of unnecessary traffic jams and so on.

It’s the inaction of government that’s most infuriating.

There is no plan.

All we have is short-termism. The last ‘intervention’ announced by government was the 50 million litres of diesel sourced by Public Enterprises Minister Pravin Gordhan from PetroSA in late November. It remains unknown how this was actually paid for. That stock lasted about a month (quite where Eskom is sourcing the diesel to burn – as recently as Tuesday night – is a mystery).

It’s a no-brainer

The calculation on whether government ought to find the extra money needed for diesel is disarmingly simple.

Economists put the cost to the economy of Stage 6 load shedding during business hours at R500 million per hour.

Other, lower estimates have this cost at R50 million per stage per hour.

Lessening the acuteness of load shedding by two stages would therefore mitigate the damage to the economy by about R200 million.

We’d need just two working days of constant load shedding to justify the cost. Even if one were generous and halved the impact, you’d need less than a week to justify spending money on diesel.

(One particularly aggressive estimate puts the total cost to the economy last year at over R1 trillion.)

Any rational person would choose burning as much diesel as possible in the short- to medium term.

3. Power stations still vulnerable to crime:

Eskom’s head of security Karen Pillay says the deployment of SA National Defence Force (SANDF) troops at power stations in Mpumalanga has done little to deter crime.

President Rampahosa deployed the SANDF to Eskom power stations last month to deter crime, but Pillay says that criminal activity is certainly still occurring at power stations where the SANDF is present – despite no official reports of suspected sabotage at any of the power stations.

4. Weak economic growth in 2023:

Financial services company BNP Paribas said that South Africa will likely see weak economic growth in 2023 as the country faces global headwinds and further domestic challenges.

The company estimates 2023 GDP growth to reach 0.2% – reflecting a weaker net trade and consumption outlook.

“On top of this black growth view, we expect inflation to remain sticky for longer as the lagged effect of higher wages and rebounding service prices eat into disposable incomes, forcing more action out of the SARB (South African Reserve Bank),” said BNP Paribas.

Combined with low expected growth, the group said that stagflation risks loom large in South Africa.

Stagflation refers to a period of economic hardship characterized by stagnant economic growth, high unemployment, and rising prices (inflation).

For emerging economies such as South Africa, stagflation can be particularly damaging as it can lead to a decline in living standards and a decrease in investment, further inhibiting long-term economic growth.

Previous concern

This is not the first warning of stagflation in South Africa. In May 2022, presenting at a financial stability review, the SARB noted that global stagflation is one of the major concerns for the economy.

The central bank said that continuous slow and inequitable growth, rising inflation, and extra pressure on key sectors of the financial system would all result from stagflation.

Jeff Schultz, the chief economist at BNP Paribas, said in November 2022, that the Reserve Bank would unlikely slow down on rate hikes, contributing further to a rough period of stagflation.

“Stagflationary conditions are less than ideal for the SARB, but don’t expect the central bank to blink in its pursuit of price stability,” it said.

5. Fire Transnet’s top brass:

The mineral council of South Africa (MCSA) – representing South Africa’s biggest mining companies –  has called for prominent Transnet executives to be fired –  including its CEO.

The council said it has lost confidence in Transnet’s management to fix its issues, which is having a disastrous effect on the mining sector.

MCSA members account for over 50% of Transnet’s total business.

All information sourced from articles posted by: TimesLive, Moneyweb, BusinessDay, BusinessTech, and City Press.

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