The Ponte tower, center, stands without electrical power as darkness surrounds residential homes due to a load shedding blackout by Eskom Holdings SOC Ltd. in the Troyeville suburb of Johannesburg, South Africa, on Monday, Nov. 3, 2014. Eskom said South Africa's power supply remains strained as it investigates what caused a silo storing coal to collapse, forcing the state-owned utility to cut electricity to customers. Photographer: Dean Hutton/Bloomberg
The Ponte tower, centre, stands without electricity as darkness surrounds homes due to a load shedding blackout by Eskom in the Troyeville suburb of Johannesburg.

Bruno Dimana sits in the dark at the menswear shop he helps manage in a usually bustling district of Johannesburg, and sighs at the latest power cut that he says keeps customers away.

“It’s bad,” he says. “Nobody wants to shop in the dark.”

Mr Dimana’s shop was one of scores of businesses in the Rosebank area of the city left without lights on Monday as Eskom, the state utility, launched its latest round of load shedding — planned power cuts designed to help conserve electricity supplies.

The outages are the worst since 2008 and come as the company grapples with a power crisis partly caused by years of insufficient investment in infrastructure that is heaping more pain on South Africa’s already ailing economy.

The problems come amid mounting pressure on the rand — which hit six-year lows against the US dollar this week — and scrutiny on the government’s credit rating with Fitch, the rating agency, due to deliver the results of its review on Friday. Last week, Richard Fox, a Fitch analyst, warned that the government’s deteriorating finances were pushing the nation towards junk status.

Moody’s and Standard & Poor’s have already downgraded South Africa this year, with electricity shortages included among structural constraints.

Just hours after Mr Dimana sat in the darkness waiting for customers, Tshediso Matona, Eskom’s chief executive, stood before TV cameras and apologised to the nation for the latest load-shedding.

Power capacity unavailable due to breakdowns

Speaking after five consecutive days of outages, Mr Matona blamed the cuts on “unexpected challenges” in the creaking system. These included the difficulty of securing millions of litres of diesel to run back-up gas turbines; poor coal quality and nearly two-thirds of Eskom’s installed baseload capacity being past its “mid-life”.

And after years of poor planning and under-investment — seen as a symptom of failed management at state-owned entities — there will be no quick fix for Eskom’s woes, the company admits. Instead, supply will remain severely constrained into next year and beyond.

“We are living on the edge,” Mr Matona said. “Any abnormal event . . . pushes us over into load-shedding.”

Chart: South African real GDP growth

The utility insists it is in control of the situation and has been trying to restrict load-shedding to weekends. But in addition to the outages, Eskom has this year often required energy intensive industries to cut their consumption by 10 per cent.

This hits the mining and manufacturing sectors, which together contribute about a fifth of gross domestic product in Africa’s most developed and energy intensive economy.

Dennis Dykes, chief economist at Nedbank, estimates the power constraints could shave up to 0.5 per cent off growth, which is forecast to be 1.4 per cent this year — the lowest level since a 2009 recession.

“The indirect effects could be a lot more significant because of the loss from the fixed investment,” he said. “People are not going to put in additional production capacity knowing they might be faced with power cuts.”

Neren Rau, chief executive of the chamber of commerce and industry (Sacci), said he was particularly worried about retailers being hit by the weekend outages — small businesses that cannot afford contingencies and tourism-dependent towns.

“We are in crisis,” Mr Rau said. “The maintenance challenges and the failures [at Eskom] we are experiencing are increasing and becoming deeper in terms of their impact.”

Chart: South African rand

The problems at Eskom, which produces more than 95 per cent of South Africa’s electricity, date back years. In an effort to keep the country’s lights on, the utility has put off maintenance since before the 2010 football World Cup and has concentrated on keeping existing, rundown plants running.

Eskom has generation capacity of about 43,000MW, but its plant availability is only 75 per cent — 10 per cent less than five years ago. The situation was exacerbated when a coal silo at its Majuba plant collapsed on November 1. Coal now has to be trucked from a stockyard and offloaded on to mobile conveyors, dramatically reducing the plant’s output.

At the same time, four gas turbines designed to run for three hours at peak periods are running at 14 to 15 hours to support the system. This cost Eskom R1.3bn in diesel last month, putting severe financial strain on the cash-strapped utility.

Eskom is building two multibillion dollar coal plants — Medupi and Kusile — which will add 9,600MW to the grid. But their completion has been delayed by more than two years — 12 months of which is put down to worker strikes — and they have run far over budget.

The first unit of Medupi will add 800MW and is due to go on line next year. But Eskom is three to five years away from recovering its reserve margin.

“February and March are looking pretty concerning,” Mr Matona said. “Whether we load-shed because we run out of diesel [for the gas turbines] suggests the problem is bigger than Eskom’s — it’s a national problem.”

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