Eskom's recent achievement of 200 days without load shedding is expected to positively impact South Africa’s GDP, with economists predicting a growth rate of at least 1.6% on Sunday.
Eskom's recent achievement of 200 days without load shedding is expected to positively impact South Africa’s GDP, with economists predicting a growth rate of at least 1.6% on Sunday.
Eskom announced on Sunday that the country had reached the 200-day milestone as a result of the Generation Operational Recovery Plan.
It said unplanned outages had been reduced by 8.6% and the Energy Availability Factor (EAF) had gone up by 7.7%.
EAF refers to the percentage of available electricity that is being generated by the power utility.
Eskom said the plan was expected to contribute to a potential growth of 2% in the South African economy, however, economists predict growth will be closer to 1.6%.
Asked about Eskom’s milestone, an energy expert said a change in leadership and a reliable maintenance plan at the power utility were contributory factors but another noted that there had also been a slight reduction in demand for electricity from the grid as more consumers were installing solar power systems and businesses closed.
Professor Raymond Parsons from North-West University’s School of Business and Governance said that both the advent of the Government of National Unity (GNU) and increased energy security had been good news for the economy.
“The positive economic outlook outlined by the South African Reserve Bank Governor to Parliament must therefore be broadly endorsed. It is still too early to project a 2% growth rate next year solely on the basis of a better Eskom outlook.”
Parsons added that most economic forecasts were still around 1.6% for next year.
“We should therefore rather wait to see what authoritative GDP growth forecasts will drive the overall economic situation in 2025 when the finance minister presents the key medium term budget.”
Waldo Krugell, an economics professor at North-West University, said it was important to note that progress was being made to improve EAF.
“They have made progress by improving the EAF and they are not just simply burning diesel to keep the lights on. I do think the 2% GDP prediction is too high.
The Sarb is still thinking around 1.6% and the World Bank around 1.4% GDP.”
He added that energy security was just one of the factors that contributed to the GDP, with the others being “interest rates, consumer spending in response to that and also the influence from international economies”.
Professor Bonke Dumisa, an independent economic analyst, said that he was optimistic and was in agreement about a potential 2% GDP growth.
“The fact is that load shedding was destroying the South African economy and businesses. The milestone achieved has restored investor and business confidence and has improved economic recovery. The markets and the economy have also responded well to the introduction of the GNU and this also contributes to positive outlook for GDP.”
Dumisa added that there was however concern with Eskom’s proposed tariff hike.
“If Eskom’s planned tariff increase of 36% was implemented, it would impact inflation and cause inflation to rise.
This would undo the progress we had achieved, as we once had inflation of over 7%; it’s now below 4.5%. We definitely need the government to ensure that we don’t get to a situation where inflation rises significantly. Electricity is a major contributor to inflation.”
Ruse Moleshe, managing director of RUBK, an energy and infrastructure consulting and advisory company said Eskom’s change of leadership had contributed to the milestone.
“The new board set out clear targets and filled critical vacancies at the executive level. Eskom leadership also introduced performance incentives for staff. Taking over some of the debt by the National Treasury improved the availability of funds, enabling Eskom to procure parts.”
Moleshe added that working well with government stakeholders helped to ensure that Eskom received the approvals to return significant capacity from Kusile power station.
“This, together with reduced unplanned outages, supported by a reliability maintenance programme led to plant availability and improved performance we are seeing now.”
Energy expert, Professor Wikus van Niekerk of Stellenbosch University said that there was less demand for electricity due to the large roll out of private solar energy systems.
“This as well as the closure of mines and factories has resulted in less demand.
Eskom is also doing better on EAF due to initiatives started by the previous leadership which are only bearing fruit now.”
Energy expert Clyde Mallinson said the country had one of the worst years of load shedding in 2023.
“There was a shortfall of 1 800 MW in 2023 and the situation has improved due to three units from Kusile coming back to service and bringing 2 100 MW back online.
“However, Kusile was a temporary fix and there is risk if Kusile units are lost that we could return to load shedding. It is important for the government to build more generation capacity through wind and solar while having this improved situation if not load shedding will still remain a possibility.”
The Mercury
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