South African businesses and households struggled to make their own plans to keep the lights on during the worst bout of loadshedding to ever hit the country last week.
Economists have warned that the impact of loadshedding, and more intense Stage 6 loadshedding, is already hitting the economy, the strength of the rand and international sentiment.
Bureau for Economic Research economists noted in their Weekly Review on Monday that the illegal strike that plunged the country into darkness signalled the “worst loadshedding on record”.
“The consecutive days of stage 6 load-shedding (with stage 4 required on the weekend and at night, and a return to stage 6 later today) was way beyond the magnitude of rolling blackouts implemented in the past. Indeed, the much-fussed-about move to stage 6 in 2019 lasted barely a day,” said BER.
“While not all employees were part of the unlawful industrial action, some striking workers blocked the entry of non-striking staff, which meant that up to 90% of staff at some plants were not working.”
Conflicting messages about the progress of wage negotiations between Eskom, government and the unions abounded throughout the week. Public Enterprises Minister Pravin Gordhan said a wage agreement had been reached on Tuesday and that workers would return to their posts on Wednesday. However, the unions dismissed this, saying the revised offer needed to be taken to members and some workers continued to strike.
The wage offer discussed on Friday amounted to a maximum 7% increase, with some higher paid salary levels seeing smaller increases. Unions had earlier demanded 12%, while Eskom initially offered between 4% and 5.3% salary hikes.
The unions and Eskom are expected to meet again on Tuesday, with reports over the weekend suggesting that the latest offer would be accepted, but that there was still contention about some benefits.
Eskom said that about 2 700MW, up to three stages of loadshedding, was offline on Friday directly as a result of the shortage of workers.
“Even with a resolution and workers returning to their posts, critical plant maintenance has been delayed, which increases the likelihood of more intense loadshedding going forward. Indeed, varying stages of loadshedding will be implemented throughout this week, with Eskom saying yesterday it will still be a few weeks before power generation recovers to pre-strike levels,” said the BER economists.
“This does not bode well for economic activity at the start of the third quarter. Despite this, Eskom stated that stage 8 loadshedding remained highly unlikely.”
Higher than forecast diesel prices have also led to surging costs, and in June, Eskom’s diesel bill was R1.5bn, more than double the budget for the month.
“While many businesses and households have found ways to cope with the lower stages of loadshedding, beyond stage 2, the negative impact on the economy amplifies with each additional stage. Examples of this include electricity substations tending to break down more frequently when subjected to regular stop-starts due to loadshedding. This results in longer-than-scheduled electricity outages,” said BER.
“Some municipal managed water reservoirs deplete during loadshedding and do not always have sufficient time to recover, while even traffic lights with back-up battery power supply tend to stop working after a few hours. Many battery or other household-based alternative power solutions struggle to keep up with extended periods of no power, or do not have sufficient time to recharge in between blackouts. Even more permanent solutions such as diesel generators run into trouble after consecutive days of stage 4 or more loadshedding,” the economists added.
Growthpoint Properties said it was struggling to source sufficient diesel to keep generators going for its properties, which include big shopping malls.
“Due to the record-high price of diesel, some businesses have to re-evaluate when it is essential to keep powered up during Eskom blackouts. There is more pain to come on that front, with a hefty fuel price increase expected on Wednesday. This is in part due to the halving of the R1.5/litre fuel levy relief to 75 cents, unless government decides to prolong the relief further. In addition to further depressing already subdued SA business and consumer confidence, the move to stage 6 also soured foreign investor sentiment towards SA. This likely contributed to the slide in the rand exchange rate,” the economists said.
The rand lost about 4% week-on-week against the US dollar, closing weaker than R16/$ on four consecutive days last week.
