JOHANNESBURG-South Africa’s shrinking economic fortunes were dealt another blow yesterday as Eskom carried out a phase 2 load to shed – for the first time since March – putting the country’s sovereign credit rating at risk. 

The cash-strapped utility is re-rotating power outages that could last until the end of the week as generation problems weighed in and on its supply. The troubled power industry said it was cutting 2,000 megawatts (MW) from the grid as a result of high levels of unplanned breakdowns and a broken conveyor belt supplied by Medupi power station, with 600 MW lost from five generating units due to a leaking boiler pipe.

Last month, Eskom assured the country that no plans to shed the load are expected during October. The utility said it would ramp up maintenance on its neglected generating units in the next seven months to ensure the country has enough energy to sustain demand. The implementation of the fourth phase of loading in the first quarter of this year led to a decline in the economy, as production was stopped for up to 12 hours a day.

Johann ELS, chief economist at Old Mutual Investment Group, said the shedding of the burden would have an impact on business confidence. “It’s negative in an era when the economy is so weak and trying to recover; it affects confidence. But it is difficult to quantify, as the mines did not report how it affected them, ” ELS said.

“For the last four years, our economy has been trying to grow above 1 percent, so we need all the electricity we can. We need Escom to maintain its power plants.” The decline in the burden has particularly affected the country’s production and mining operations, leading to growth for 2019 below 1 percent. On Tuesday, the world Bank revised its growth forecast to 0.7% from the previous 1.5% in April. The reserve Bank of the South African country has put economic growth for this year at 0.6 percent.

The structural, operational and financial challenges facing Eskom have been described as the biggest threat to the country as the energy utility has more than 450 billion in debt.

The government has given Eskom at least R129bn in guarantees in the medium term. Despite Moody’s assurances that it is likely to maintain an investment grade with a negative Outlook in its next review in November, there are concerns that Eskom’s ability could jeopardize this even further. Senior dealer at the Treasury Andre Botha said the outages could see the weakening of the Rand negatively impacted in the next few weeks by interrupting stable power supply.

“Eskom has just announced that there is a possibility of rolling blackout. Rand didn’t like that headline and we’re trading on R15 at the moment, ” Botha said. “With local issues in play again, expect some volatility in the next few weeks.”

BUSINESS REPORT 

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