Eskom and Transnet collapse in one graph

The collapse of Eskom and Transnet can be seen in the sharp decline in electricity produced and cargo handled at South African ports so far this year. 

These sharp declines were revealed in the South African Reserve Bank’s (SARB) Monetary Policy Review, a bi-annual report containing economic data that informs its stance on interest rates. 

The Reserve Bank has consistently highlighted the economic effects of Eskom and Transnet’s collapse and their impact on inflation in South Africa. 

It has been noted that these structural issues constrain the growth of the South African economy, while companies are spending billions to reduce their reliance on their deteriorating services.

Eskom’s collapse has been well documented, with the utility failing to provide sufficient electricity for South Africa since load-shedding began in 2008. 

Load-shedding has since only gotten worse, reaching record levels in 2023. 

On the other hand, Transnet’s collapse has gone largely under the radar compared to Eskom. The economic impact of South Africa’s rail and port utility has only been quantified recently, and it is far worse than expected. 

The collapse of Transnet is set to cost the country R1 billion a day in economic output, equivalent to 4.9% of annual GDP or R353 billion in 2023.

This was revealed in a study by the GAIN Group, a boutique consultancy focusing on contract research of freight transport in particular.

The Minerals Council of South Africa estimated that poorly run ports and freight-rail lines may have cost the country R150 billion in exports last year.

Some argue that it is as significant as Eskom’s impact and could be even worse than the impact seen as a result of load-shedding.

The collapse of these two state-run companies can be seen in the graph below, produced by the Reserve Bank, which shows the sharp decline in electricity produced and cargo handled at South Africa’s ports. 

However, this graph also shows a positive development in South Africa – the economy has become less reliant on ailing state-run companies.

The narrative around electricity generation and load-shedding is beginning to change. It is gradually becoming more positive.

The private sector is filling the void left by Eskom, similar to how private airlines filled the void left by the collapse of South African Airways.

South Africa is experiencing a boom in solar installations, with over 4,400 MW of rooftop solar installed outside government-procured solar. This is expected to increase by 420% by 2030. 

Data from Eskom and Professor Anton Eberhard revealed that South African households and businesses had installed 4,412 MW of rooftop solar in the 12 months to June 2023, a 349% increase from March 2022. 

The import of solar panels has also hit a new record, with R12 billion worth of panels imported by South Africans in 2023, adding 2,200 MW of capacity to the grid.

RMB’s head of markets research, Isaah Mhlanga, said a strong correlation exists between the manufacturing sector’s performance and load-shedding levels. 

Higher stages of load-shedding would typically result in reduced manufacturing output. 

However, manufacturing volumes have remained relatively stable in 2022 and the beginning of 2023 despite the increased intensity of load-shedding. 

Mhlanga attributes this to the increased electricity supply from the private sector, as the amount of non-Eskom electricity supply has steadily increased. 

“In the future, we will have less and less of an impact on economic output from the unstable electricity supply,” Mhlanga said. 

According to data from Eskom, installed solar capacity has doubled in the last 12 months, reaching 4,400 MW in June 2023 from less than 1,000 MW in March 2022.

“This is extraordinary. The private sector has responded not just for their own needs but also to decarbonise the production of goods to give them access to developed markets,” he said.