LONG TERM POWER PLANS IN PLACE
Dylan Burke - IPS
21 February 2008
Presenting his annual budget last February, South Africa's veteran Finance Minister Trevor Manuel painted a glowing picture of the nation's economic outlook, predicting growth would be at least five percent in the coming three years. But while the government has yet to concede its plans have been blown off course, economists say the drastic shortage of power which has forced daily blackouts will inevitably lead to a smaller level of growth.
If many could remember back to a few years ago, South Africa was producing more electricity than it needed, the apartheid regime, obsessed with self-sufficiency, went on a power-station building binge in the 1970s and 1980s. South Africa has long taken abundant, low-cost electricity, thanks to the countries huge coal reserves, for granted.
First National Bank, one of the leading banking intuitions in South Africa stated that 68% of home buyers have admitted that electricity load shedding is influencing their residential property purchasing decisions. With choices influencing where they would purchase their homes in areas where load shedding wasn’t prevalent. A few said that they had postponed their decision to buy or were waiting to see what happened.
The country's mining industry, the backbone of Africa's biggest economy, has been crippled by the outages with gold, diamonds and platinum producers having to halt all but essential maintenance operations since last Friday.
The impact is also felt beyond South Africa's borders. Eskom is rationing the electricity it exports to Mozambique, Zimbabwe, Namibia and Swaziland. The prices of gold and platinum were forced up by the interruption of mining. The crisis is likely to affect global platinum markets, where South Africa produces over 75% of the world's supply, the chief component in the catalytic converters production,
But the more fundamental impact is that on investor confidence. The blackouts have highlighted the acute shortage of skills and resources to drive SA's R420bn infrastructure plan. Analysts predict the crisis will have a "shock impact" on economic growth and warned that the annual rate could fall as low as two percent "depending on how long-lasting the crisis is, this is a supply-side shock that will affect not just mining, but manufacturing, retailing and other services, there is no economic sector that is immune so the economy will be negatively impacted for sure.
The government of Cape Town will hand over R60 billion over the next five years to the stressed power utility, Eskom, to aid in the correction and uplifting of the power sector. The R60b will be a long term investment, not a short term fix for the current problems. The government would not be supporting the investments if they weren’t confident they were viable and economically thought out. Eskom has embarked on a massive expansion programme, costing R343 billion over the next five years, with a final cost set at R1.3 trillion by 2025.
Trevor Manuel has announced a newly introduced levy of 2c per kilowatt hour; this will help Eskoms expansion programme, the good point to note is that the levy would not impact on the monthly costs of those households and businesses that reduced their power consumption by the required 10 percent, a positive lure for money conscious spenders.
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