Dimming the Lights

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South Africans have been told they will have to get used to regular disruptions in the electricity supply for the next five years, creating long-term ramifications for the country's economy.



With blackouts now affecting most regions of the country on a regular basis, state-owned Eskom has been forced to admit to an angry public there is no quick solution to the problem.



On January 23, Eskom Chief Executive Officer Jacob Maroga said it was unlikely South Africa would see an end to power shortages until at least 2013, when new generation capacity comes on line as part of the company's construction programme that is projected to cost R300bn ($42bn). He made it clear there was little the state could do in the interim.



"I think we need to be circumspect about our expectations of what government can do," Maroga told a meeting of business leaders. "The government has intended to do a lot of things, but the politics of government is that it takes time. We need to take things forward ourselves."



Maroga acknowledged that Eskom faced a number of major obstacles, including a long delay in launching its new construction programme, an insufficient margin of reserve in generating capacity, and the massive increase in demand, which he said had grown by 50% since 1994.



The long hot South African summer is only making matters worse, with the incidence of blackouts increasing as business and residential use of air conditioning burgeons and places greater demand on the electricity supply.



The government has shouldered at least some of the blame, with President Thabo Mbeki admitting that Eskom executives had warned as far back as 2000 that South Africa would face a critical deficit in generating capacity unless a new construction programme was initiated.



At the time, Eskom had a surplus capacity of around 30%, though this has now dwindled to below 10% due to the rapid increase in demand brought on by the expanding economy and extensions of services into regions previously not connected to the power grid.



With up to 20% of the company's capacity off line due to breakdowns or maintenance on ageing plants, Eskom's ability to supply customers is in the red and its clients often in the dark.



The government said it had hoped the gap between Eskom's static output and growing demand would be met by the private sector. However, with the price of electricity kept low by state regulators there has been little incentive for the private sector to commit the large amounts of time and money needed to expand the energy sector, leaving Eskom to pick up the load.



Though there has been a recent push to encourage the development of alternative energy sources, with the state offering tax breaks and incentives to investors in the wind energy and biofuel sectors, there is little to suggest these forms of electricity generation can make much of a difference to the shortage of supply.



Such are the concerns over the long-term effects of the power shortages that questions have been raised about how South Africa will be able get everything done in time to host the 2010 football World Cup, an event the government has touted as a driving force for economic growth.



"We are hoping to have more than 300,000 visitors, all using electricity," Michael Tatalias, the chief executive officer of the South Africa Tourism Services Association said in an interview with local media. "The stadiums may have all the most wonderful generators in the world to broadcast the games, but will people come to South Africa to see them if they know they will be going back to hotels and guest houses with no power?"



Tatalias said the tourism industry was in for a lean year in 2008 and the ongoing power outages could do it irreparable harm.



"The industry will take a huge financial knock this year. So far little attention has been paid to the effects of continuing power outages on the tourism industry," he said.



With almost all sectors of the economy affected by the electricity shortages, it will not just be tourism that will suffer. Power outages could reduce mining and industrial output, putting the government's target of 6% annual economic growth at risk. Last week, diamond, gold, platinum and other mines stopped production due to power shortages - a situation Eskom said could continue at the mines for the next four weeks. Such stoppages are expected to fuel further demands for imports to make up the shortfall and consequently widen the trade deficit.



As more private firms look to install generators to keep the current flowing, South Africa's fuel bill will also increase, at a time of near record high prices.



Having stalled over investing in new energy infrastructure, the government will have to deal with an angry public frustrated by the lack of electricity.

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