(Bloomberg) -- South Africa is teetering on the brink of its most severe power cuts yet, just two months after the government announced emergency measures to try and end intermittent outages, prompting President Cyril Ramaphosa to cut short an overseas ...
State power utility Eskom Holdings SOC Ltd., which provides the bulk of the nation’s electricity, began cutting 6,000 megawatts from the national grid over the weekend — equivalent to the most on record — to prevent the collapse of the national grid and its executives warned there was a risk the situation could deteriorate further. The rand weakened to a two-year low against the dollar on Monday, while shares of mining and manufacturing companies slumped.
Eskom is struggling to meet electricity demand because its old and poorly maintained power stations continually break down, and the nation has been subjected to rolling blackouts since 2008. There have been blackouts for eight straight months this year. While Ramaphosa announced plans two months ago to increase Eskom’s maintenance budget to improve its plants’ reliability and enable it to buy more surplus power from private producers, those measures largely focused on longer-term solutions and haven’t made a tangible difference so far. An earlier plan to buy emergency power from producers has faced ongoing delays, with only 150 megawatts of capacity from private projects by developer Scatec ASA forging ahead.
The power cuts contributed to the economy’s 0.7% contraction in the second quarter. BNP Paribas analysts estimate that it would cost the South African economy 5.1 billion rand a day should the situation worsen to the point where 8,000 megawatts of capacity were removed from the grid.
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