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ABOUT R500 million an hour is being lost to the country’s economy as a result of Stage 6 load shedding during business hours, say economists.
Eskom chief executive Andre de Ruyter has also not ruled out the possibility of moving to higher stages of load shedding, which can go up to Stage 8.
Bureau for Economic Research chief economist Hugo Pienaar said: “The department of energy and the National Energy Regulator of SA uses a measure called the cost of Unserved Energy (COUE).
“This is currently estimated to be about R85/kilowatt hour. Based on this, the cost to the economy of an hour of Stage 6 load shedding during business hours is about R500 million.”
The biggest impact of load shedding was consumer and business confidence.
“There are several impacts, but perhaps the most significant has been that load shedding depresses consumer and business confidence as it adds to the cost of doing business in South Africa.
“From a business perspective, years of unreliable power supply is most likely an important reason why private sector fixed investment, especially in energy-intensive sectors such as manufacturing and mining, has been poor.
“It may also have led to the closure of many smaller businesses that do not have the cash reserves to invest in alternative energy sources and therefore lose business during bouts of load shedding.
Ultimately, economic growth and job creation suffers because of load shedding.”
He said load shedding is expected to be a feature of the SA economic landscape until the country added 4,000 to 6,000 megawatts of new private sector generation capacity.
“Recent energy reform announcements that strive to make it easier for private firms and households to generate their own electricity will support this, but it is still likely to take a number of years to reach a point where we are free from the burden of load shedding.”
Eskom on Monday announced the launch of three programmes to procure power for the national grid.
The combined impact of the programmes, predicted to exceed 1,000MW, are expected to make an important contribution towards reducing the load shedding burden on consumers.
Independent Power Producers are set to benefit from the new business opportunity as soon as the end of the week.
Bureau of Economic Research, research director, Professor Carel van Aardt said except for Covid-19, load shedding was one of the “major contributors to lower levels of lower GDP growth, lower employment, increasing levels of consumer financial vulnerability and poverty as well as increasing income and wealth inequality in South Africa”.
“The BMR recently published a report on what is currently happening to the economy at macro-, meso- and micro-levels and it appears from this report that the South African economy is at present suffering much more than a cyclical downswing which will improve over the short- to medium-term.
“This is rather a case of the economy being impacted by all the said downside risks on a continuous basis with no immediate hope that these downside risks will abate soon.”
Van Aardt said it can be expected that the net effect of these downside risks over the medium to long-term will be an economy locked into a range of 0 to 2 percent growth per annum with negative consequences for employment, income and expenditure growth, poverty, inequality, business and consumer confidence.
“If load shedding becomes even worse and South Africa becomes grey listed later this year, the said low growth trajectory of 0 to 2 percent might even shift down to 0 to about 1.5 percent per annum,” he said.
Meanwhile, Nersa also kicked off its public hearings on Eskom’s Fifth Multi-Year Price Determination (MYPD5) application for the 2022/23, 2023/24 and 2024/25 financial years.
In her presentation, Jillian van der Merwe from Municipal Accounts Disputes, who represent customers within municipalities on issues of electricity and service delivery disputes, asked that Nersa only grant Eskom a three to six percent increase.
“One must bear in mind municipalities are suffering infrastructure damages.
“Customers cannot keep paying for Eskom’s inefficiency.
“The more they implement load shedding, the higher increases they demand.
“They have totally failed, they are inefficient, riddled with corruption and nothing has been done.”
The hearings will continue virtually until September 23.