South Africa’s energy crisis poses ‘existential threat’ to its economy

By Jessie Gretener and Olesya Dmitracova, CNN

South Africa’s President Cyril Ramaphosa has declared a national state of disaster in response to the country’s drawn-out energy crisis, calling it “an existential threat” to Africa’s most developed economy.

Setting out the government’s key objectives for the year in a state of the nation address Thursday, Ramaphosa said the crisis is “an existential threat to the economy and the social fabric of our country” and that “our most immediate priority is to restore energy security.”

South Africans have endured power cuts for years, but 2022 saw more than twice as many blackouts as any other year, as aging coal-fired power plants broke down and state-owned power utility Eskom struggled to find the money to buy diesel for emergency generators.

Blackouts in South Africa — or load-shedding as they’re known locally — have been lasting for as long as 12 hours a day. Last month, people were even advised to bury the dead within four days after the South African Funeral Practitioners Association warned that mortuary bodies were decomposing because of the constant electricity outages.

Growth is plunging

The intermittent power supply is hobbling small businesses and jeopardizing economic growth and jobs in a country where the unemployment rate already stands at 33%.

South Africa’s GDP growth is likely to more than halve this year to 1.2%, the International Monetary Fund has forecast, citing power shortages alongside weaker external demand and “structural constraints.”

Ramaphosa said Thursday that the national state of disaster would begin with immediate effect.

That would allow the government “to provide practical measures to support businesses,” and ringfence power supply for critical infrastructure, such as hospitals and water treatment plants, he added.

Ramaphosa, who was forced to cancel a trip to the annual World Economic Forum in Davos, Switzerland, in January as a result of the rolling blackouts, also said he would appoint a minister of electricity with “full responsibility for overseeing all aspects of electricity response.”

In addition, the president unveiled anti-corruption measures Thursday “to guard against any abuses of funds needed to attend to this disaster,” and a dedicated South African police service team to “deal with the pervasive corruption and theft at several power stations.”

The vast majority of South Africa’s electricity is supplied by Eskom via a fleet of coal-fired power stations that have been overused and under-maintained for years. Eskom has very little backup power, which makes it difficult to take units offline to perform crucial maintenance work.

The utility has lost money for years and, despite steep tariff increases for customers, still relies on government bailouts to remain solvent. Years of mismanagement and systematic corruption are believed to be the key reasons why Eskom has been unable to keep the lights on.

A wide-ranging commission of inquiry led by Judge Raymond Zondo into corruption and fraud in the public sector in South Africa concluded that members of Eskom’s former board should face criminal prosecution due to management failures and a “culture of corrupt practices.”

— Rebecca Trenner contributed reporting.

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