South Africa’s electricity problems will end soon – Standard Bank CEO

Standard Bank CEO Sim Tshabalala said public and private investments would bring an end to South Africa’s energy crisis within the next few years.

In Standard Bank’s annual integrated report for the year ended 31 December 2022, Tshabalala said Standard Bank is confident that the country will once again have a “fully adequate supply of electricity” in the next few years.

“The right set of policies are – at long last – in place, and a great deal of new public and private investment in generation is starting to follow,” he said.

Standard Bank’s chair, Nonkululeko Nyembezi, noted the government’s efforts to accelerate private investment in generation and the rooftop solar incentives announced earlier this year.

“The government now appears to be implementing a reasonably coherent and focused five-point recovery plan,” she said.

“It is notable and encouraging that the private sector is called upon to play a key role in the implementation of the recovery plan.”

She said if the current pace of investment in renewables and in battery storage capacity continues for the next 18 months to two years, “a relaxation of the current electricity constraint is probable over the medium term”.

In recent years, the government has increasingly eased laws restricting private power generation and procurement.

Most recently, restrictions on the size of projects have been entirely removed, further opening the door for private power generation.

“In my view, African governments too often continue to underestimate the capacity of a competitive and appropriately regulated private sector to solve pressing economic and human development problems,” said Nyembezi.

One of South Africa’s largest companies, Remgro, recently announced its plans to sell wind and solar power to South African businesses in mid-2023 through the Energy Exchange of Southern Africa.

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‘Costing us dearly’

Tshabalala acknowledged that South Africa’s severe electricity shortage has significantly impacted the country. “South Africa’s severe shortage of electricity is costing us dearly,” he said.

South Africans have experienced months of near-continuous load-shedding, and Eskom’s latest forecast shows no sign of relief in 2023.

Consumers and businesses have felt the impact of load-shedding on their pockets, with many companies reporting a significant increase in their operating costs and drops in their profits due to power cuts.

Companies have reported billions of rands lost to load-shedding – from increased operating costs to run generators, investments in alternative energy sources and profits plummeting due to lost sales.

Standard Bank has also paid the price of intensified load-shedding.

The bank’s load-shedding-related expenses quadrupled in 2022 when the bank spent R72 million on fuel to combat power interruptions.

Load-shedding was one of the main drivers behind the bank’s operating costs, and bank branch costs rose 9% in the latest financial year.

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Growth optimism

Standard Bank’s optimism for South Africa shows in its growth projections for the country.

Load-shedding has severely dampened GDP predictions for the country’s growth this year.

The South African Reserve Bank recently lowered its expectations for South Africa’s GDP growth in 2023 to 0.2% from the previous 0.3%, largely due to the effects of continued load-shedding.

This projection is more optimistic than the International Monetary Fund’s (IMF) prediction of 0.1% growth in 2023. The IMF’s low expectations are also mainly attributable to the effects of load-shedding.

On the other hand, Standard Bank expects GDP to grow by 1.2% in 2023.

However, Tshabalala warned that the electricity crisis poses a considerable downside risk to this projection.

“The economy has been severely slowed for several years already by this constraint; we will continue to underperform for as long as the constraint continues to bind.”