- South Africa faced a near-total blackout in February, and recent reductions in load shedding could signal greater risks ahead. Nedbank Chief Economist Nicky Weimar believes that the possibility of a total grid collapse is now more likely, prompting businesses and industries to prepare contingency plans.
- Independent analyst JP Landman is concerned about Eskom’s reduced load shedding and deteriorating operating reserve margin, which increases the risk of a grid collapse. Transparency regarding the true state of the power grid is essential to avoid masking the problem.
- South Africa’s economy remains fragile due to ongoing load shedding, rising inflation, and increasing interest rates. While the energy landscape is expected to undergo significant changes over the next seven to ten years, businesses and industries must brace themselves for potential disruptions caused by a total blackout.
South Africa narrowly avoided a total blackout in February, local economists warn, and the recent reduction in load shedding could actually signal more significant troubles ahead. The country experienced an unprecedented period of Stage 6 load shedding in February and even seemed to approach Stage 7, although no official announcement was made by Eskom, the state power utility.
Nedbank Chief Economist Nicky Weimar analyzed the available load and demand numbers during that period and concluded that South Africa was on the brink of a complete blackout. Nedbank has been developing scenarios for total grid failure, and following the February incident, Weimar now believes it to be a more likely possibility.
Weimar emphasizes the importance of businesses preparing for such an eventuality. She said, “We need to get businesses, in general, to become prepared if that happens. So, we’ve all been roped into this operational risk to say if the power goes out, how will we as banks continue to keep the lights on, keep people’s money safe, and make sure that lending continues.” Other industries, especially food production, have also started implementing contingency plans in response to the February scare.
Independent political and economic analyst JP Landman has expressed concerns over Eskom’s recent generosity with power. He noted that as long as load shedding continues, the risk of a blackout is minimal. However, reduced load shedding could increase the likelihood of a grid collapse. Landman believes that if South Africa needs to endure Stage 10 or 15 load shedding to avoid a grid collapse, Eskom should be transparent about the situation instead of concealing the issue.
Eskom explained the mid-March reduction in load shedding by citing an improved energy availability factor, as six of its coal-fired power stations achieved a 70% energy availability factor – a milestone last reached on 8 May 2022. However, Landman suspects that Eskom’s load shedding schedule may be manipulated, given the utility’s deteriorating operating reserve margin, which measures the difference between peak demand and Eskom’s nominal capacity.
Before announcing the improved energy availability factor, Eskom’s operating reserve margin remained in negative territory throughout most of February and up to 11 March. The company acknowledges that a 15% reserve margin is considered acceptable. In the last weekly system update published by Eskom for the week of 13-19 March, the operating reserve margin reached 15% only on one day. No further weekly system updates have been published since.
Landman expressed his concerns, stating, “I don’t like the fact that we don’t have as much load shedding as we used to because the purpose of load shedding is to avoid a blackout. If you have less load shedding, you increase that risk. And this reserve margin story for me is a bit disturbing.”
Weimar questioned whether the reduced load shedding was a strategic move to show that the new electricity minister was making progress. She expressed concern that South Africa might be sailing too close to the edge. “Because it almost happened, and the grid is set to shut down automatically when the drawdown on the grid exceeds the supply to a certain margin, you’ve got to avoid that sort of situation,” Weimar explained.
Weimar predicts that South Africa will continue to struggle with a “very fragile economy” this year due to the pressures of load shedding, alongside broadening inflation and rising interest rates. More businesses are reporting sales disruptions, which is reducing overall economic activity, despite the increased installation of backup power and solar systems.
Nedbank forecasts a mere 0.4% economic growth for 2023. Weimar explained that with only slight changes to the assumptions used in Nedbank’s model, the bank could easily predict growth rates of 0.1% or even a contraction of -0.1%. This highlights the precarious nature of South Africa’s economic prospects.
Landman remains skeptical of promises that load shedding will be eliminated within a year to 18 months, estimating that it won’t end before the close of 2024. However, he believes that by the time South Africa overcomes the load shedding crisis, the country’s energy system will have undergone significant changes, and Eskom may not survive in its current form.
Landman stated, “It will change completely in the next seven to ten years. And the energy revolution is, to some extent, driven by load shedding. People are so fed up with load shedding.” This suggests that the ongoing crisis may ultimately drive innovation and transformation in South Africa’s energy sector.
In conclusion, the risk of a grid collapse in South Africa has increased, according to Nedbank’s chief economist, and the country’s economy remains fragile. As the nation grapples with the challenges posed by load shedding, rising inflation, and climbing interest rates, businesses and industries must prepare for the possibility of a total blackout. While the future of South Africa’s energy landscape is uncertain, it is clear that significant changes are on the horizon.