South Africa’s power situation has improved after a two-day crisis that threatened supplies to mines, state electricity firm Eskom said on Wednesday, but rolling cuts are set to continue.
Eskom has been struggling to contain South Africa’s power crisis, the result of years of underspending on electricity generation capacity, leading to mines shutting down in January and millions of homes left without power.
The company raised further anger and inflation fears on Monday when it said it wanted a 53% rise in power prices.
South African Reserve Bank Governor Tito Mboweni said Eskom could find other ways to fund its expansion programme than to raise prices by such a large margin, which is bound to make it more difficult to bring inflation back within a 3% to 6% target.
”I want to discuss [this] with both Eskom and the Treasury … There are other ways we can [use] to make the pain somewhat less than it might be,” he told reporters.
But Mboweni acknowledged that higher power prices may help change consumer behaviour and curb demand.
Investment bank Lehman Brothers said in a research note that a 53% price hike, instead of an agreed 14,2% rise, could increase inflation by a further two percentage points, pushing it over 10%.
”It would continue to add pressure to wage growth and second-round inflation effects, but we await further details and reactions from government and the African National Congress [ANC] before formally shifting our inflation forecast,” Lehman said.
Hitting consumers hard
The ANC said in a statement a further electricity price hike would hit the poor hardest.
”We find it unfair that while Eskom has not demonstrated any ability in dealing adequately with the current power crisis, they are eager to call for tariff hikes that would hit consumers hard in the pocket,” it said.
The Congress of South African Trade Unions, an ANC ally, condemned the request and demanded that alternative sources of income be explored or that price increases be directed at heavy industry or the rich.
”If anything even approaching such increases were to be implemented the effects would be utterly devastating for the country,” it said, adding it had declared a labour dispute with Eskom over possible job losses from power cuts.
Eskom plans to spend R343-million in the next five years and R1,3-trillion until 2025 to increase its generating capacity, including constructing new nuclear power plants.
The Eskom spokesperson said load shedding would continue on Thursday, but there was likely to be full power for the Easter weekend from Friday.
A programme of cuts was restarted on Monday as wet weather raised electricity demand.
The utility warned on Tuesday that power could be cut to the mines if two more of its 160 generators failed. At that time nine generators had tripped and another nine were shut down for maintenance.
The spokesperson said four power generating units were back up on Wednesday, and the company was cutting up to 1 000MW of power. On Tuesday, it cut 3 000MW.
The electricity grid supplying Africa’s biggest economy came close to collapse in January, forcing gold and platinum mines to shut down for five days. Since then mines have been operating below full power, driving up precious metal prices and raising fears of possible job losses and slowed growth. — Reuters