Load-shedding could reduce South Africa’s tax collection by R77 billion this year as it is expected to cost the economy R400 billion more than last year, according to Electricity Minister Kgosientsho Ramokgopa.
Ramokgopa said during a lecture at the University of Pretoria that the impact of load-shedding on the South African economy may amount to R1.6 trillion this year compared to R1.23 trillion last year.
This would result in R77 billion in tax earnings being lost in 2023 – roughly 5% of the country’s total tax revenue.
The minister said the inconsistent electricity supply from Eskom is negatively affecting the government’s ability to help the poor.
Ramokgopa estimated that job losses due to elevated load-shedding in 2023 could equal 860,000.
In response to questions from BusinessDay, the minister’s office said these figures are based on modelling done earlier in the year and thus assumed higher stages of load-shedding than the country is currently experiencing.
South Africa has experienced more load-shedding so far in 2023 than in the entirety of last year and as much as the 14 years prior to that combined.
The hardest hit sector is mining, which is set to halve the amount of tax it paid in 2022 to R50 billion this year. In 2021, the country collected R110 billion in tax from this sector.
Reuters reported that data from the Minerals Council South Africa indicated that mining sales for the last 12 months had declined by over 4%, and output had declined by 7.8% from 2019 levels.
Based on this data, the impact of load-shedding on tax collection in South Africa is likely to be greater than estimated by the Electricity Minister.
SARS Commissioner Edward Kieswetter said earlier this year that the revenue service would lose at least R60 billion this year because of load-shedding, but it could lose as much as R160 billion.
Kieswetter cited a CSIR report which estimates that the South African economy lost R560 billion because of load-shedding.
The economic losses were due to 6,400 GWh of unserved energy by Eskom over the last calendar year.
South Africa has a tax-to-GDP ratio of 25%. A rough extrapolation means SARS lost at least R140 billion.
However, it does not consider the downstream effect of power cuts, like businesses and factories closing down.
Kieswetter, therefore, estimates that a less conservative figure of the cost of load-shedding on SARS’ tax collections can be as high as R160 billion.
“We are doing more research and are trying to understand the time lag effect in what happens in the economy and what happens in the fiscus,” he said.
The significant loss to the South African fiscus means the country has less money to provide social services, employ key personnel, and provide additional social grants.
“If the growth in electricity production slows down, as it has in South Africa, there is a direct and immediate impact on the economy,” he said.
Kieswetter said that, apart from collecting fewer taxes, load-shedding also costs SARS millions in operational costs.