News in South Africa 7th February:

1. 100 consecutive days of load shedding:

Energy minister Gwede Mantashe says that the ongoing energy crisis in South Africa is an “irritation” to society, and if it is not resolved, it could lead to a revolt among the populace.

100 consecutive days of load shedding
Photo by Rene Asmussen

Speaking at the Investing in Africa Mining Indaba on Monday (6 February), the minister said that the ongoing power supply disruptions through load shedding had a significantly negative impact on society and the economy at large.

For the mining industry, in particular, load shedding and other domestic factors like freight and transport bottlenecks have contributed to an overall decline in the sector.

“Failure to attend to and address the declining Eskom plant performance and subsequent higher stages of load shedding is an irritation to society and has the potential of pitting society against the government,” he said.

Civil society is already mobilising against the government over the power crisis, with opposition parties like the DA rallying members to march on the ANC’s Luthili House, and the EFF setting a date for what it intends to be a ‘national shutdown’ over poor governance of the crisis.

Smaller initiatives have also circulated over social media and community groups, trying to push back against what many see as a lack of urgency and action over the crisis.

2. Load shedding costs SA R900m a day:

South Africa’s electricity crisis is costing the economy as much as R899 million per day, according to central bank estimates.  

Rolling blackouts of about 6 to 12 hours a day, or so-called stage 3 and stage 6 outages, detract between R204 million and R899 million from the economy daily, the South African Reserve Bank said in an emailed response to questions on Monday.

Load shedding is needed to protect the grid from collapse when Eskom’s aging and poorly maintained and mostly coal-fed plants can’t meet demand.

Eskom has imposed stage 6 cuts, the most severe yet, for 10 days so far this year, according to Bloomberg calculations.

The Reserve Bank lowered its economic growth forecast for this year to 0.3% from 1.1%, with Governor Lesetja Kganyago saying power disruptions will shave 2 percentage points off output growth. It predicts that electricity will be rationed for 250 days in 2023, which if realized will be a record. 

3. Insurers pull cover for grid failure:

As South Africans contend with the worst load shedding on record, the insurance industry faces a dilemma that has triggered the introduction of exclusionary clauses exempting insurers from paying out claims arising from an electricity grid failure.

Unlisted insurance giant Hollard has informed its clients that it won’t be covering any losses caused by the collapse of the national grid, with Santam due to implement a similar exclusion in April.

In a letter to clients, Hollard simply states: “Electricity Grid Failure exclusion is added.”

This will spare the company from having to cover any losses or damage occurring as a consequence of a partial or complete collapse of Eskom’s power supply.

“While grid failure remains unlikely, it is unfortunately now a possibility and reinsurers have indicated that they will not provide reinsurance cover in this eventuality,” Hollard spokesperson Warwick Bloom tells Moneyweb.

“This means that electricity grid failure – as defined in our letter to our clients – is an uninsurable event. Along with other insurers, Hollard is attempting to make this clear for policyholders.”

Pressure from global reinsurers

Santam, South Africa’s biggest short-term insurance group, reported a 60% rise in claims for damage to sensitive electronic items in September when it delivered its half-year financials.

The insurer said that in its efforts to reduce its exposure to business interruption claims, it will, from 1 April 2023, cease providing cover for electricity grid failure claims. This will be applied on renewal of policies and to all new policies.

“The unprecedented levels of load shedding and pressure from global reinsurers that require Santam to reduce its exposure to business interruption claims arising from failure of public utilities and public telecommunications has led to the insurer implementing a general electricity grid failure exclusion on all policies,” it said.

4. Mining industry hit new record of R1.18tn:

South Africa’s mineral production hit a new record of R1.18-trillion in 2022 despite continued logistical constraints at Transnet, mining industry lobby group Minerals Council South Africa said on Monday.

The council said strong commodity prices were a tailwind for the mining industry, with 2022’s mineral production up from R1.1-trillion recorded a year earlier.

Council CEO Roger Baxter said the new production record highlights the mining industry’s continued contribution to the public purse.

“Once again, the mining industry has shot out the lights when considering its financial performance and contribution to the economy in 2022. However, we remain concerned about the worsening constraints in rail and port logistics, which means we have yet again forfeited the benefits of high commodity prices and demand, as well as inadequate electricity supply,” said Baxter.

“Transport logistics and energy are two of the most critical issues the Minerals Council is dealing with at a presidency, ministerial and Transnet board level. We are in a partnership with the Transnet board to urgently resolve bottlenecks on the four bulk mineral export channels.”

Baxter said ports and rail corridors undermined the potential of the sector, with the opportunity cost resulting from rail and port constraints climbing to R50bn in 2022 from R35bn the year before when delivered tonnages are measured against targeted tonnages.

5. Over R12.5bn recovered:

The Anti-Corruption Task Team recorded 35 court cases involving 180 accused between April and December.

With the gains made in the Investigating Directorate’s 32 state capture-related cases involving 187 accused, more than R12.5 billion has been recovered so far, according to Justice Minister Ronald Lamola. 

Lamola was speaking at a hybrid webinar on Monday, themed “Countering the Corrupt – Reform of the Criminal Justice Administration in South Africa”.

“The impact of the performance of law enforcement agencies can be felt in all areas of our democracy. When law enforcement agencies fail to perform, we are judged as a country by international financial institutions such as ratings agencies, the Financial Action Task Force (FATF), and so on,” he said.

“Capacitation of these entities, including the NPA (National Prosecuting Authority) has received the much-needed injection of funds to assist it in achieving their mandates. The impact of grey-listing by the FATF, [and] we are soon to receive the final outcomes [of that], will have a dire effect on our economy and ability to raise funding in the international markets. This is where coordination and collaboration are needed to work together, not only as the justice cluster, but with the economic cluster as well.”

According to Lamola, a new bill is “undergoing internal consultative processes” and will ensure the “independence and the security of tenure of the incumbents in the [Investigating Directorate] are strengthened”.

All information sourced from articles posted by: BusinessTech, Fin24, Moneyweb, TimesLive, and News24.

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