• November 4, 2023 12:55 am

South Africa’s Multi-Billion Rand Losses Due to Eskom’s Load Shedding

Oct 4, 2023
South Africa's Multi-Billion Rand Losses Due to Eskom's Load Shedding

Eskom Load shedding in South Africa has led to significant financial losses in both the public and private sectors. While municipalities have incurred costs of over R25 billion due to load shedding in the last financial year, major retailers like Shoprite and Pick n Pay have spent billions on diesel to power generators.

South Africa’s Multi-Billion Rand Losses Due to Eskom’s Load Shedding

Additionally, the manufacturing sector’s confidence has dropped, affecting economic growth. Despite these challenges, the South African economy has shown resilience, but the economic impact of load shedding is still substantial.

Municipal Costs of Load Shedding:

Municipalities in South Africa have faced substantial costs due to load shedding. Over 89 municipalities reported cable theft incidents and infrastructure repair costs, totaling R1.6 billion. Costs related to water treatment works and acquiring diesel for generators amounted to R1.4 billion.

The revenue loss for all municipal distributors reached R21 billion annually, with an additional R1.1 billion spent on staff overtime and contractors for electrical infrastructure repairs. The total cost of load shedding for municipalities exceeded R25 billion in the last financial year, with the actual figure likely higher given the ongoing load shedding.

Challenges Faced by Municipalities:

Municipalities often lack the technical capacity and budget to protect their electrical assets. Vandalism is exacerbated as criminals exploit load shedding schedules. Moreover, middle- and high-income households and businesses are reducing their reliance on the grid with backup power solutions, impacting revenue collection.

Private Sector Impact:

Major retailers like Shoprite and Pick n Pay have incurred significant costs to mitigate the effects of load shedding. Shoprite spent R1.3 billion on diesel to power generators over 52 weeks, compared to R620,000 in the previous year.

Pick n Pay anticipated a loss in the first half of the 2024 financial year, partly due to R396 million spent on diesel and net incremental energy costs of R190 million. The manufacturing sector has also been affected, with a decline in confidence and a drop in the Absa Purchasing Managers’ Index.

Economic Impact:

Quantifying the exact economic impact of load shedding is complex, given its direct, indirect, and broader effects on the economy. The South African Reserve Bank estimated that load shedding would reduce economic growth for 2023 by two percentage points. Researchers approximated the daily cost of stage 6 load shedding at R900 million.

In 2022, the estimated economic impact was around R560 billion, and with worse outages in 2023, the impact is expected to be even higher.

Resilience and Hope:

Despite the economic challenges posed by load shedding, South Africa’s economy has demonstrated resilience. Eskom aims to keep unplanned outages below 14,500MW, potentially avoiding stage 4 load shedding during the summer. Furthermore, a decrease in demand due to alternative energy sources has contributed to load shedding at lower levels, although it has impacted municipal revenue collection.

Conclusion:

Load shedding has imposed substantial economic costs on South Africa, affecting municipalities, retailers, and the manufacturing sector. Quantifying the precise impact remains challenging, but it is undeniably significant. However, the country’s resilience and efforts to reduce unplanned outages offer hope for improved conditions in the future

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