CBI-electric (Circuit Breaker Industries)

Not only is load shedding costing South Africa around R 4 billion a day, it is also pushing the country into a technical recession due to quarter-on-quarter economic declines, according to both ABSA and Citibank. To resolve this, Finance Minister Enoch Godongwana announced several reforms in his recently delivered Medium Term Budget Policy Statement. These included restructuring Eskom, establishing an independent transmission company and finalising the Electricity Regulation Amendment Bill.

“Unfortunately, these reforms and many of the previous Government interventions, come at a cost to implement – adding to the total already incurred by the country’s energy crisis,” says Dr Andrew Dickson, Engineering Executive at CBI-electric: low voltage.

“Despite the Minister’s positive medium-term projections for the country’s economy, my concern is that the electricity sector reforms have been introduced far too late to divert the country from its current economic trajectory, especially in the short-term,” he shares. “With 2022 being South Africa’s worst-ever year for load shedding to date, this will continue costing the country now and into the new year, at the very least.”

Businesses bearing the brunt

Dr Dickson explains that, in comparison to the first and second quarters of the year, which saw 10,5% and 2,1% decreases in liquidations, there was a 2.1% increase in the third quarter. “The Russia-Ukraine war, Covid lockdowns in China, ongoing logistics constraints and mounting global inflation all contributed to this, but with load shedding intensifying during Q3, it exacerbated these impacts. Load shedding affects productivity which in turn reduces economic activity. On a monthly basis, this has declined by 2.3%, according to the Reserve Bank’s Composite Leading Business Cycle Indicator.”

He points out that the insurance sector was hit hard by liquidations. “This is most likely due to spikes in load shedding-related claims which not only include damages caused by power surges but also burglaries and car accidents which tend to proliferate during outages.”

“The second most-impacted sector was catering and accommodation,” notes Dr Dickson. “This is unsurprising, seeing that establishments without alternative energy supplies are unable to operate whilst being load shed. Even those that do have generators are struggling to keep their ovens on, given this year’s petrol price hikes. Last year, the Restaurants Association of South Africa estimated that running a generator cost around R1,000 an hour, so one can only imagine how much more expensive it is today. Although the country is now entering peak tourism season, load shedding will not be ending, so the sector will lose out during what is meant to be its busiest – and most profitable – time of year, potentially leading to more liquidations in Q4.”

Alternative solutions can accelerate a turnaround

The Minister, however, made mention of several alternative energy-generating initiatives that could help to add about 14 gigawatts of electricity capacity to the grid over the next two years. These include expanding and accelerating the procurement of new generation capacity from renewables, gas and battery storage; facilitating investments in rooftop solar by developing a feed-in tariff for small-scale embedded generation projects; and investigating the expansion of tax incentives for commercial installations.

“Initiatives like these do offer hope for the future but they will take time to implement and will still require the development and deployment of governing policies and regulation, not to mention investment,” says Dr Dickson. “In the meantime, it is essential for the private sector to put measures in place so that businesses can continue to weather the storm. With Absa, Nedbank, Standard Bank and FNB all offering loans for solar PV installations, not to mention the tax incentives available to assist in offsetting the costs of assets used in the production of renewable energy, investing in alternative energy is becoming easier and an attractive way for businesses to remain operational during load shedding. “

He notes that businesses should also be looking at ways of changing or reducing their energy consumption to not only alleviate pressure on the grid but also save money. “In doing so, this can help to better maximise any capital available for the installation of some form of renewable power, be this either solar, batteries or a combination thereof.”

For starters, Dr Dickson explains that companies can monitor and control their electricity use with smart technologies. “Not only does this enable them to keep an eye on what exactly is consuming electricity and how much, but also when loads are being used which could be beneficial in shifting usage to off-peak times.”

“The only way that businesses and the economy can recover is if a constant supply of electricity is maintained. While Government is making slow inroads towards this, these efforts need to be bolstered by the private sector or else we face an even darker 2023 in every sense of the word,” concludes Dr Dickson.