South Africa’s new load-shedding challenge

South Africa’s latest challenge regarding load-shedding is how to grow the economy, and what needs to be focused on, with power cuts largely being a thing of the past. 

With the end of load-shedding, it was widely expected that South Africa’s economy would grow significantly faster, as it was the main constraint on local activity. 

Estimates from the Council for Scientific and Industrial Research showed that South Africa’s economy lost R481 billion worth of output in 2024 from load-shedding. 

While significant, this is substantially lower than the R2.9 trillion it estimated the country lost in 2023 when there were record blackouts. 

As a result, load-shedding shaved more than one percentage point off economic growth, with the Reserve Bank consistently pointing it out as a binding constraint on local activity. 

Thus, it was expected that with the end of load-shedding, South Africa’s economy would grow significantly faster than in 2022 and 2023. 

However, this has not been the case, with growth in 2024 being only 0.6% and it is expected to be around 1.3% in 2025. 

Econometrix chief economist Dr Azar Jammine explained that this is largely due to the country taking several other hits from crises in the logistics sector, crime, and corruption. 

Jammine pointed out to CNBC Africa that businesses and individuals doubted that load-shedding could be brought to an end so swiftly. 

They were also doubtful that a stable power supply would be sustained over the long run, resulting in businesses still being hesitant to invest on the basis of no load-shedding. 

“Now that it has ended, one would have expected economic activity to pick up even more than it has over the past 18 months,” Jammine said.

“Unfortunately, just as we solved the load-shedding problem, we confronted huge problems on the transport and logistics front, with the rail network virtually collapsing and ports being extremely inefficient.”

According to the World Bank’s latest Container Port Performance Index, many of South Africa’s ports are among the worst in the world with regard to efficiency.

This has largely undermined any benefit from the end of load-shedding in South Africa, with one crisis effectively replacing another. 

Municipal headache

Apart from this, there has also been a sustained decline in service delivery at a municipal level, with local infrastructure deteriorating significantly amid a lack of maintenance. 

This has resulted in sporadic power outages due to local infrastructure being overloaded and Eskom having to resort to load reduction to protect distribution infrastructure. 

As a result, the positive impact of the end of load-shedding has not been felt as deeply or as widely as initially expected.

Electricity Minister Kgosientsho Ramokgopa has said this is the next frontier for Eskom and his ministry to tackle, with load reduction being a significant problem. 

“If there is something that keeps me awake at night, it is load reduction and the impact it is having on South Africans,” Ramokgopa previously said. 

“Load reduction primarily happens in peri-urban areas, informal settlements, and less affluent areas. It gives the impression that load reduction is a punishment for the poor.”

Solving this issue requires the buy-in of municipalities that manage this infrastructure, which makes it an extremely difficult problem to solve. 

While load-shedding was largely due to the underperformance of Eskom’s power plants, the collapse of distribution infrastructure is occurring across the country. 

“It is a failure at the level of Eskom and municipalities to provide sufficient infrastructure and capacity to accommodate the load growth in particular areas,” Ramokgopa said.  

A major driver of this has been the proliferation of informal settlements in parts of South African cities and rural areas, creating greater levels of demand that were not planned for. 

“We have not kept up with that by renovating and expanding the capacity of distribution infrastructure in parts of South Africa,” the minister said.

This is exacerbated by the financial mismanagement of municipalities, with many having insufficient funds to clear their maintenance backlogs due to increased spending on consumption, particularly salaries. 

Energy analyst and managing director of EE Business Intelligence Chris Yelland has referred to the distribution segment as completely dysfunctional. 

Many municipalities are unable to pay Eskom for the electricity it provides, placing it under increasing financial pressure. 

“This points to a completely dysfunctional electricity distribution sector. I do not see sufficient attention given to the reforms needed,” Yelland said.

“This sector really needs more attention now, much more attention because that is where a big crisis is brewing.”