Energy Crisis in South Africa and Europe
Energy Crisis are happening both in South Africa and Europe. Energy is an important factor for any economy, in terms of growth and Development. In this article, we will analyse as well as see what’s happening in Both South Africa and Europe. Since we are going to analyse both South Africa and Europe – this article will be of two parts/ installment.
In the First Part, We will analyse Energy Crisis in South Africa, reason for it and what actions government are taking in order to address the issue along with how long the crisis may last. So , let’s unravel what’s happening in South Africa First.
Energy Crisis in South Africa
On 9th February 2023, Cyril Ramaphosa, South Africa’s President, Declared a “State of Disaster” as the country was experiencing 12 hours of scheduled power cuts in a day in some parts.
A year ago, the President (Cyril Ramphosa) laid out a plan and designed an energy action plan. This was with a long-term goal of securing a reliable electricity supply for the country. The news media stated that officials in January said that an energy action plan announced last year is starting to be implemented.
Once upon a time, a country that saw itself as an industrial powerhouse is now facing severe power cuts. The reason behind this is due to the bad condition of the power station, which is ageing and poorly maintained along with being debt-ridden by a state-owned company Eskom Holdings SOC Ltd., the country’s electricity provider. This resulted in non-repairs and regular power shutdowns.
The Electricity supplies from the grid are switched off to avoid the grid collapsing. This was started as an emergency measure in 2007, which has become routine, whereas the establishment of two new power plants failed.
For about 15 years South Africa was affected by outages and now the most industrialised economy is facing its worst energy crisis with more than 200 days in 2022 and every day this year.
The South African Reserve Bank, countries Central bank, in response to an email (according to Bloomberg news, so mail is supposed to be from Bloomberg, not sure though) said that the energy situation is costing between 204 million and 899 million Rands (which is almost $51 billion) per day.
In the MPC Statement of January 2023, the Central Bank lowered its estimation of Economic growth from 1.1% to 0.3%. It stated that the Central bank has considered load-shedding, given its scale, and it deducts 2% from growth in 2023 as compared to 0.6% in its earlier estimates. It also revised its forecast of GDP growth for 2024 to 0.7% (down from 1.4%) and 1.0% for 2025 (down from 1.5%).
In the MPC statement, released on 26th January 2023, the Central Bank of South Africa, stated that
“The number of days of expected load-shedding in 2023 has been increased to 250 days from 100 days. In 2024 the number of days was revised up to 150 days from 40 days. Load-shedding of 100 days has been assumed for 2025.”
If what Central Bank has estimated/ stated is realised then it will be a new record. The power shutdown may cost almost $13 billion to the economy.
Due to Load Shedding (the local term for power cuts or blackouts) of 10 to 12 hours a day, the local businesses are affected, teaching has become tough, no traffic lights, and foods are rotting in warm fridges. The unreliable power supply (or say erratic power cuts) affects the country’s mining giants – its major exporters. The list goes on, in totality, South Africa is in a deep energy crisis.
The State-Owned power company is now operating at less than half of its installed capacity. South Africans enjoyed some of the cheapest electricity till 2007, the first year of load shedding. The prices doubled between 2008 and 2012. In 2021, even before the Russian-Ukraine war, the prices more than tripled.
The Power Generation in South Africa is largely coal-dependent. The third-largest user of coal for Electricity Generation in the world is South Africa. South Africa, gets its coal from China, India and Brazil.
In December 1998, the Department of Minerals and Energy in its “White Paper on the Energy Policy of the Republic of South Africa” forecasted that growth in electricity demand will exceed supply in 2007 and there is a need for large capacity expansion in the medium-term to meet the needs of the growing economy. But, things have gone worse today, fall in per capita electricity consumption in the past ten years. These Blackouts have severely affected farming, manufacturing, construction and trade.
Minister in the Presidency Mondli Gungubele, in one of his media statements (23rd February 2023), said that “Energy security is the top priority for government and should serve as our focus point. As the government together with its partners, we are forging ahead with the Energy Action Plan. We are implementing the Energy Action Plan, and we are seeing some successes, despite challenges that we face along the way.”
He also stated in its Media Statement on Fast Track Energy Action Plan that South Africa has signed 26 projects, agreements signed with independent power producers – this will generate around 2,800 MW. Along with this new generating capacity will be a solar panels on the roofs of houses and businesses. The pricing structure work will be completed soon, Gugubele said. He also said that this will allow the consumers/ customers to sell surplus electricity to the grid from the rooftop solar. He believes that in this way people can meet their own power needs as well as help to increase the amount of electricity in the grid.
He also stated that by playing our part even in small ways we can improve the generation to at least 70% by 2025.
South Africa should find an alternative solution to move from being entirely coal-dependent – though coal is a most dependable energy source. Poor Governance has to be curtailed altogether. Without long-term investments, old infrastructure will crumble. It is also pertinent to understand that as the prices and supplies of coal fluctuates it will only add burden to the power suppliers (esp. exchequer).
Whatsoever the Crisis will continue for another at least a year or it may even last for maximum of 2-3 years until the crisis is almost over. Being one of the fastest and most industrialised economies in Africa, we need to see how the economy is going to respond during this crisis. A strong resilient economy can always bounce back from any crisis at the earliest. Will South Africa achieve the same? Only time can answer this question.
These are some of the points on unravelling the South African Crisis. The second part of the Article on Energy Crisis in Europe will be published in a couple of days.
