In 1942 South African historian, CW de Kiewiet, coined the phrase that South Africa
progresses “politically by disaster and economically by windfalls”. We thought we had succeeded in reversing these trends. The political disasters of the past were self-inflicted, and we hope (in light of recent shenanigans) that democracy’s self-correcting mechanisms will hold ...The electricity crisis confronting us suggests that we are fast succeeding in turning (at least some) economic windfalls into disasters â€" and the tragedy is that this one is also self-inflicted. The crisis is of two makings; the country did not invest enough in expanding its power generation capacity and
perilously neglected maintenance of the capacity that it has. In 1984/5 SA had surplus generating capacity of 40% of what the country needed. The economy is estimated to be 100% larger today than 1985 (manufacturing 70% larger), and generation capacity in that year was 45 000 megawatts. We today have 44 000
megawatts available, speculatively, but it is estimated that during December 2013, we had 40% of that capacity unserviceable. The reserve margin of 31% in 1994
went down to 7% (2007) and is nonexistent now. The benchmark result for maintenance is to have only 1% unplanned production losses, more or less the state of affairs in 2005. Deferred maintenance days have risen from 1500 (2006) to 7000 days (2013/4). The average unplanned production losses have therefore
risen from 1% to 15% today. The conundrum for the country is encapsulated in a
simple accounting term, called â€œdepreciation”. When looking at fixed investment in powergenerating capacity, one has to consider a continuously adjusting trend allowing for new investment and depreciation. If allowance has not been made for sufficient maintenance, then this trend is downward. The ratio of total fixed investment in generating capacity relative to the size of the economy forms a bell curve, reaching a peak in 1985/6 â€" and by 2006/7 it had deteriorated to 1960’s levels. We are in the trough as it stands. Arguments are raging about where the blame should rest, delays in new capacity construction, unpaid tariffs, cross subsidisation of local authorities, energy in-efficiency etc. The fact of the matter is that the situation is dire, by any other name a crisis. While all of these are important, none of the conclusions will solve the current problem. The costs are horrendous. For the metals and engineering sector, the month-long metal strike wiped out R7 billion of value added, which was 8% of its contribution to the economy in 2014. SA Reserve Bank reported that the estimated total impact of the
strike on the economy amounted to half a percentage point loss in GDP growth. The impact of load shedding would be worse; assuming demand management savings of 10% with two hours (stage 1) of load shedding a day, and allowing for the differential impact on the sub-industries within the metals and engineering sector, 23% of value add could be lost over a year. Underutilisation of the sector’s current capacity will deteriorate, profits will suffer and medium to longer term (often
export) supply chain contracts may be lost.

The costs are mounting daily, delaying action for the future is not a choice. Indeed the spectre of losing the whole generation system, which can put the country back a decade is too ghastly to contemplate. Certainty of when outages take place has to be a priority. Eskom’s larger power users (and direct customers) have almost perfected communication to alleviate this problem for their 24 hour operations. They are in constant communication with Eskom, via e-mail, telephone and SMS warning systems. This does not mean that the non-continuous operations are not disrupted; they are requested almost daily to save more or shut down other operations. What do they do with a batch of molten plastics, a furnace full of boiling steel, or for that matter tons of chocolate concentrate? The majority of users of electricity are serviced by local authorities and metros. Efforts are being made (some more successful than others) to enhance accuracy, but local users should stand together and urge/pressurise their suppliers to be punctual. Joint efforts in industrial areas to share (and contribute) to planned outages in local areas must be pursued. There is a groundswell of support from different sectors of the economy for outages to be rigidly applied, to create certainty, even when generation capacity is available. The choice of whether this is preferable above the waste generated by unplanned stoppages is really a complex issue, but should be considered. There is no doubt that investment decisions by companies will have to be diverted away from expansion and renewal to energy efficiency and/or standby, if not full replacement of generation capacity. This may sound harsh, but boils down to the duration of the constraint (which took six years to come to this point) that could take six years to be resolved. It is patently clear that investment in manufacturing, metals and engineering has been held back by the inconsistency of supply and the cost of energy trends. SA manufacturers are importing more components for assembling locally due to cost advantages and the insecurity of local supply due to these disruptions. If your company is one of such component suppliers, it is of strategic importance that you should try and prevent this trend from escalating. This is a dire situation, but South Africans are known to â€˜maak a plan’ ... now is again such a time.