Economic development

Power cuts weakening SA economy

The impact of daily – and increasingly severe – power cuts is being measured across the South African economy. It has led to dire warnings of social unrest, food shortages and a national blackout.

The country had more power cuts, known as load shedding, in 2022 than in any previous year, and 2023 may be even worse.

The SA Revenue Service (SARS) has now quantified the damage – R560 billion, according to the Council for Scientific and Industrial Research (CSIR) and lost government revenue of R160 billion this year alone because of lower economic activity.

“If the growth in electricity production slows down, as it has in South Africa, there is a direct and immediate impact on the economy,” said SARS commissioner Edward Kieswetter. The result was less money to provide social services, employ key personnel and provide additional social grants.

Gareth Ackerman, chairman of major retailer Pick n Pay, has said load shedding is an “existential threat” to South Africa’s food industry. He warned that food shortages could lead to social unrest.

This followed an earlier warning of a “deepening food crisis” from AgriSA chief executive Christo van der Rheede. Both he and Ackerman said the crisis was being exacerbated by the government’s refusal to lower the cost of diesel that food retailers use to power backup generators. While food producers do not have to pay a levy that goes to the Road Accident Fund, retailers have not been given this exemption.

Van der Rheede said the impact of load shedding on agriculture went beyond the pricing and availability of food.

“The declining capacity of South Africa’s farmers to produce food will also eventually lead to job losses…This loss of jobs will, in turn, plunge more people into poverty, increasing the gap between those who can and cannot afford food and dramatically reducing food certainty for many households,” he said.

With predictions of even higher levels of load shedding when electricity demand rises in the coming winter months, there are suggestions that inadequate management of the balance between supply and demand could lead to the collapse of the national electricity grid.

South Africa’s insurance companies are taking no chances. They are now refusing cover for any damages that result from a grid collapse. This is a good thing, says the insurance ombudsman, as the resultant claims could overwhelm the insurance industry.