An Overview

Since the 1970s, countries around the world have been experiencing energy crises to the point of crippling the country’s economy and South Africa is no different. The energy problems of South Africa began even before the age of plasma Tvs (in 2008 precisely) when the president was still Thabo Mbeki. The country began experiencing power outages that would last for hours or even days, Businesses suffered and the country’s economic backbone, the mining industry faced its worse challenge as production plummeted and the currency weakened.

In other industries, the same critical level was being experienced wherein restaurants could not store perishables, serve food properly, streets were in gridlock because traffic lights did not work, offices could not function, and school hours were disrupted.

The whole situation was unexpected because a few years before 2008, South Africa had an oversupply of energy and electricity. Right after the Apartheid period ended, the government went full blast on building power stations in an independent bid to become self-sufficient. Some of these stations were not even used for long as the country was enjoying the lowest electricity costs in the world. Many assumed that the situation would never change although the government knew that unless they did something, power would run short by 2007.

As South Africa Grew …

The problems began when Eskom Holdings SOC Ltd, the state-owned provider of electricity of 95% of the country’s needs, got locked into a debate on policy about private ownership of the electricity-generating business. This caused them to hold off on improvements and new buildings to meet the growing needs of the country. They were only given to go signal in 2004. Eskom Holdings warned the country that playing catch-up in producing more power for the country’s needs would only be met by 2014, and they could only promise an additional 17,000 megawatts by then. In addition, the cost for constructing new power stations or reviving stations that were mothballed had increased exponentially. Eskom would have to look for ways to fund the R300 billion budget just to meet their 2014 goal.

As expected, the power outages began in 2008 and continue up to 2013. Eskom Holdings began to utilize what they call “load shedding.” Load shedding is another term for recurring black-outs.

Today, the growth forecast of the country of 2.7% is not expected to be met because of new rounds of load shedding. The surplus capacity of Eskom as of March 18 was at a perilous 3.3%. In December 2012k, it was at 1.7%. The minimum surplus capacity should be at 15%, according to Eskom.

Eskom Holdings Problems

Aside from the infrastructure problem, Eskom is facing other issues like non-payment, bypassing of meters, coal strikes, increasing costs, and need for repairs. Non-technical losses such as theft and non-payment remain a major headache of the company amounting to over 6,000 GWh a year. In 2007, the figure was pegged at 5105 GWh which means the problem is escalating.

The company has also been hampered by labor strikes. Last year, its profits dropped because of the work stoppage from strikes. The seemingly inability to resolve labor disputes and complaints has caused the downgrade of the company by Standard & Poor’s. This will make it more difficult for the company to solicit investors and secure additional finding for its planned expansion plans.