Eskom worst-case scenario is dangerously close

The worst-case scenario for Eskom and the South African economy is dangerously close, according to a report by City Press.

The South African Reserve Bank’s worst-case scenario would see Eskom’s power availability factor decline to 65% for months, which would result in 1.1 percentage points lost in GDP growth for the economy.

Recently, Eskom had only been able to deliver 63% of its power capacity, with the last week seeing the power utility’s generation capacity reaching historic lows – forcing the implementation of stage 6 load-shedding.

If this lack of power capacity continues for an extended period, the SARB’s model of the worst-case scenario for Eskom’s effect on the South African economy will be realised.

Citadel chief economist Maarten Ackerman said that when the SARB’s worst-case scenario was originally published, investors hoped that it represented only the bank’s worst fears, but these are quickly becoming a reality.

He added that stage 1 load-shedding costs the economy R350 million per day, with stage 4 costing R770 million a day. This means that South Africa’s economy has become so damaged by load-shedding that it is unlikely to avoid a recession.

“Whether we are talking about a recession or whether we have a good quarter here or there is irrelevant, because the consequences for the economy are equally serious,” Ackerman said.

Sabotage at Eskom

Acts of sabotage at Eskom led to a massive power loss of 2,000MW during the most recent load-shedding period.

Speaking at a media event on Wednesday 11 December, President Cyril Ramaphosa said that “someone inside Eskom” had sabotaged the system, resulting in the boilers tripping.

“Someone in the Eskom system disconnected one of the instruments that finally led to one of the boilers tripping and the system losing as much as 2,000MW,” he said.

This loss of power would have been enough to move Eskom’s load-shedding schedule from stage 4 up to stage 6 immediately.

Additionally, Eskom COO Jan Oberholzer has attributed the need to implement stage 6 load-shedding to coal procurement contracts signed by Brian Molefe in 2015.

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Eskom worst-case scenario is dangerously close