Expect load shedding to stick around for another five years: economist


Staff Writer19 April 2023


Despite the government’s ‘best efforts’ to address South Africa’s load shedding crisis with a sense of urgency, rolling blackouts are unlikely to end any time soon – and definitely not within the 12 to 24-month timeframe put forward by politicians.

This is according to Nedbank economist Johannes Khosa, who says that progress on turning embattled power utility Eskom around is slow, and that load shedding is likely to stick around for the next three to five years.

In the banking group’s latest Guide to the Economy for 2023, Khosa noted that persistent electricity shortages in South Africa have had a massively disruptive effect on all industries in the country and would remain the main drag on the economy in 2023.

“Load-shedding will likely worsen in the second and third quarters as demand for heating increases over the winter while the electricity supply remains severely constrained. It is becoming clear that the electricity crisis will not be resolved quickly,” he said.

He also said that the government’s strategy of throwing more ministers at the problem isn’t proving effective.

“Although there are now three ministers in some way responsible for energy security, Eskom’s operations have not improved,” the economist said.

This lack of improvement is also despite enormous fiscal support over the past decade amid persistent allegations of deep-seated corruption at the power utility.

“The new Electricity Minister, Kgosientsho Ramokgopa, recently indicated that Eskom could add 2,000 MW to the grid by the end of the year if plant maintenance is improved. The minister stressed that stabilising the grid would require the cooperation of Eskom suppliers and even more financial support from the government.

“This latest call for funds comes after National Treasury had allocated an additional R254.4 billion in debt relief to be disbursed over three years in February’s National Budget. This debt relief package, in turn, followed several years of substantial public bailouts and repeated above-inflation hikes in electricity tariffs.”

Given the lack of progress at Eskom, load-shedding will probably persist for the next three to five years, Khosa said.

While there is no end to load shedding in sight, some relief will likely come as independent power producers licensed under bid windows 4 and 5 start adding renewable-power output, the economist noted.

“The attractive tax incentives for corporates and households announced in the 2023 Budget Statement could also stimulate private sector investment in alternative power, helping to reduce the pressure on the national grid,” he said.

According to Intellidex analyst Peter Attard Montalto, load shedding in South Africa is definitely nowhere near being resolved.

He said that the crisis could only be resolved if the government adopts a coherent and workable generation strategy and manages to shake off the “madness” of policy proposals that fly in the face of this.

This includes getting rid of nonsensical plans to boost generation capacity by refurbishing and revitalising the existing coal fleet.

To do this, he said Eskom would need R400 billion – money that the country does not have – and it would take, at best, five years to execute – time the country does not have.

“You would still need to procure the fastest and cheapest electricity in those five years anyway: renewables, battery, a little bit of gas, rooftop solar and so on. The minister’s job is to end load-shedding, yet his plan would fail to do that even if the money was available from the magic money tree,” Attard Montalto said.

The analyst warned that the coming load shedding in winter is likely to be worse than many expect, but added that it may be the worst of it, and things could improve from there.