[R-G] South African Power Cuts

[Yoshie Furuhashi]

<http://www.ft.com/cms/s/1/81caba7c-cd85-11dc-9e4e-000077b07658,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html>
South African power cuts

Published: January 28 2008 09:44 | Last updated: January 28 2008 20:27

Electricity shortages sweeping South Africa meant visitors travelling
up Cape Town's Table Mountain last week were trapped in their cable
car. Anxious tourists do nothing for the country's image but the
ramifications of the widespread power cuts are even more serious.

The blame for the outages lies in part with recent heavy rain, but the
roots of the crisis lie much deeper. Electricity demand has been
growing strongly on the back of healthy economic performance.
Meanwhile, the government, via the state-owned electricity supplier
Eskom, has failed to invest adequately in generation capacity. To
ensure stable output, electricity generation systems need a
significant – perhaps 15 per cent – margin of supply over demand.
South African industry and consumers reportedly use 36,000 megawatts
of electricity a day, while Eskom's daily capacity is just 9 per cent
above this. Further pressures are caused by the fact that, according
to the national statistics agency, South Africa is still a net
exporter of electricity.

Delayed investment plans mean the country is not expected to be back
in a comfortable surplus position until 2012. In the meantime, Eskom
is proposing big reductions in power use by consumers and industry. A
figure of 10 per cent is reportedly under discussion with mining
companies, including the most exposed multinationals, Anglo American
and BHP Billiton. The mining industry has not yet quantified the
impact of such a cut. But if production, for example, fell by 5-10 per
cent this year, Standard & Poor's estimates that one to two percentage
points would be shaved off economic growth.

Since Eskom is a virtual monopoly, it has great bargaining power with
the miners. But this hardly reflects well on South Africa's
purportedly business-friendly credentials. Nor does the government's
handling of the crisis. With looming power shortages flagged for at
least a decade, the lack of precautionary measures casts doubt over
its management of the economy.
--
Yoshie
<http://montages.blogspot.com/>