Power crisis in South africa:An Overview

Introduction: South Africa is a country located in the southern tip of the African continent, its coastline stretches about 2850 kilometres, from the desert border with Namibia & maritime border with Madagascar. South Africa is also one of the largest economies of Africa along with being a part of BRICS grouping which is meant for developing economies, its proximity to global trade routes make it as an attractive investment option, however in the year of 2023, the emerging economy of south africa has been stuck with frequent power cuts & is close to power crisis in the country.South Africa mainstay for economy are sectors of: mining, transport, energy, manufacturing, tourism & agriculture. South Africa contributes up to 3.5% of world’s coal resources , the country’s production is about 3.3% of world’s annual production & it exports about 6% of world’s total coal exports. Needless to say, coal & power sector is the major engine for South African economic growth story. 

 Explanation: Most of these sectors are heavily dependent on power sector for their day to day functioning, in fact, South Africa’s growth rate of nominal GDP YoY is 2.0% down from 4.9% a year before it for which experts are also blaming the power crisis along with reasons like: slowdown in agriculture and global inflation cues. The energy crisis of south africa stems from coal crisis & also at a larger level where due to global disruption of supply chains, lack of proper alternatives to energy generation has meant that the pride country’s coal production has fallen steeply which has led to a lot of load shedding & subsequent, frequent shutting down of electricity in the country. The recent power crisis has its origins listed during the coronavirus period, when there was low demand for electricity. The sudden high demand on electricity meant that the estimation of SA Power generation firms was caught on the blindspot which led to the power crisis in year 2022. The year 2022 saw that the number of hours without power in South Africa increased from 1000 hours in 2021 to almost 1959 hours in 2022, and the year 2022 has been one of the most stressful years for South African electricity department as it is facing the worst crisis after almost about 10 years when in the year 2008, the overall hours of electricity shutdown was estimated to be around 900 hours which was considered a lot during those days, however with the tremendous growth of economy afterwards, it has led to pressure on electricity generation which has led to this crisis in making today. 

The energy crisis was huge even before the Russia-Ukraine war started on 23 February, 2022, even in the year of 2021 where its coal production fell steeply by the state power generation firms has been more or less stagnant since the coronavirus pandemic, About 85% of South Africa’s electricity is produced by the coal/thermal power stations which have been facing problems like lack of proper capital availability, ageing(ideally any thermal power plant should be renovated after surpassing the operational age of 25 years, which has not been done in South Africa so far), along with the issue of theft of coal whose instances have increased in the coal abundant regions of Northern south africa which has left the thermal power plants unprepared if we consider the views of experts. ESKOM average tariff prices for power in industrial areas has shot up from 43pc in 2013 to about 59 pc in 2021 which is a rise of almost about 50% in a comparatively short span of 10 years, which means that the demand is outrunning the supply of electricity.

The total energy sold by ESKOM to Industrial sector has also fallen from 75,000 units in 2004/05 to about 46,000 units in the current fiscal year. The South African Reserve Bank has estimated that the blackouts would cost the economy up to 51 million$ per day. The situation was so grave that the president of South African government even issued an investigation into Escom(which is south africa’s major coal company), whose revenue performance has been underwhelming in the last 2 years which has lost millions of dollars in irregular & sporadic spending along with structural issues due to covid crisis & the energy security issues which have plagued South African economy, which has prompted the government, industry experts to even think of diversification of south african energy streams in a phased manner, where solar energy seems to be the best possible alternative as the solar photovoltaic cells prices have fallen from $100 in 1975 to almost about 0.27$ in the year 2021, which means that its an opportunity for firms to invest in this sector which will have low production costs & even have a decent amount of share in the South African energy market by the next few years. The lithium charges in south africa is also one of the cheapest in the world. The solar energy ecosystem is available for which the biggest testimony is that it produces more solar energy than its BRICS counterparts of Brazil & India.