SA power cuts add to uncertainty

Recent power cuts in South Africa have enraged the public, raised questions over future investment in Africa’s biggest economy and increased scepticism in the country’s leaders at a time of political uncertainty.

Economists estimate the cost of the power cuts already runs to hundreds of millions of rands, with small businesses especially vulnerable, while the power crunch has cast a shadow over South Africa’s hosting of the 2010 Soccer World Cup.

Eskom plans to spend R300-billion to boost power capacity over the next five years. But customers are losing patience.

“Our leaders are just greedy and corrupt. I don’t think anything will change,” said Shanre Davids, salesperson in a shop selling keys and alarm systems—badly needed to fight rampant crime, another problem that won’t go away.

Business at the shop has dropped 50% because of the power cuts and Davids says he expects it to fall further.

Underscoring the magnitude of the crisis, Eskom has begun importing electricity from Mozambique, Zambia and the Democratic Republic of Congo—countries where blackouts have long been common, unlike in their vastly richer southern neighbour.

Investment shortfall

The power problem began years ago, but Eskom’s calls for urgent investment to meet the demands of the fast-growing economy after the end of apartheid fell on deaf ears.

South Africans and foreign investors alike are left wondering how much of a priority restoring power will be as the ruling African National Congress (ANC) now struggles with an internal crisis.

President Thabo Mbeki lost the party leadership to Jacob Zuma in December, raising concerns Mbeki could become a lame duck before he steps down in 2009—when Zuma is expected to take over if he can defeat corruption charges in court.

Reinhard Cluse, a senior economist at UBS bank in London, said the government was serious about tackling the power crisis.

“Overall it’s a cost factor that manufacturers and any direct investor is taking into consideration.
Reliable energy is an absolutely crucial problem that has been recognised,” he said.

But Eskom has said it expects power supplies to improve only by 2013 as new plants kick in, potentially setting back expansion plans by power-hungry mining firms in the world’s biggest platinum and number two gold producer.

“There is a lot of uncertainty at the moment,” said Sanlam investment management analyst Stephen Roelofse.

World Cup

The doubts extend to what the shortages will mean for the 2010 World Cup. Tourism authorities fear the power cuts could harm South Africa’s prospects for earning huge amounts of cash from the influx of visitors.

On Monday, the power cuts left hundreds of people trapped mid-air in cable cars at Cape Town’s landmark Table Mountain for hours.

“The stadiums may have all the most wonderful generators in the world to broadcast the games,” said Michael Tatalias, chief executive of the Southern Africa Tourism Services Association.

“But will people come ...if they know they will be going back to hotels and guest houses with no power?”

There are more immediate concerns on the streets. Motorists risk their lives moving through traffic intersections without the red, green and yellow lights that normally bring order.

Johannesburg’s fancy Sandton City mall, a symbol of the country’s economic boom, is also feeling the supply squeeze.

Hair salon manager Elani Kirstan tries to keep business going by putting customers on chairs along the mall’s main passageway for trims and cuts under better lighting.—Reuters

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