Ramaphosa to hold talks with ministries to stop power cuts

President Cyril Ramaphosa will hold talks with various ministries and other parties to find a solution to the power cuts that are hobbling the economy.

“More engagements are scheduled for today and tomorrow for a review of the situation and direction on urgent measures which can be taken to mitigate the impact of load shedding,” his spokesman Vincent Magwenya told reporters on Thursday, referring to the local term for rolling outages.

Electricity utility, Eskom, is implementing cuts of as much as 10 hours a day as its ageing, mostly coal-fired plants regularly fail. The country’s energy regulator gave the cash-strapped company permission to raise prices by 18.65% later this year.

Eskom price increase

In related news, Eskom has won approval to increase tariffs by almost a fifth — the most in more than a decade — though that’s still below what it says is needed to help limit worsening power cuts.

The national regulator allowed the company to increase tariffs by 18.65% for the 2024 fiscal year, it said Thursday. The utility had applied for a price increase of 32% to pay for more purchases from independent producers as it struggles to meet demand.

The cash-strapped company has said funding shortages are hurting its ability to maintain plants and buy diesel to fuel auxiliary turbines when its coal-fired units fail.

South Africa has over the past two decades gone from having surplus power to regular blackouts, locally known as load shedding.

Financial constraints at Eskom, which has R396 billion of debt, combined with operational challenges, caused the utility to impose more than 200 days of blackouts in 2022 to save the national grid from collapse.

The increase set to go into effect in April would be the biggest since 2011/12, based on the average of prices set for different sectors of the economy. A spokesman for the utility said it would comment on the regulator’s decision on Friday.

Energy Availability

As a condition of the tariff award, Eskom needs to improve its energy availability factor — a measure of how much capacity can be utilized — after it dropped to below half, Nhlanhla Gumede, a member of The National Energy Regulator of South Africa, told reporters at an online briefing.

The company was also criticized for the extensive use of diesel turbines, which are intended for peak demand periods.

“Eskom has both a debt problem and operational problem which makes the prospects of recovery very slim,” Rashaad Tayob, head of fixed income at Foord Asset Management South Africa, said before the announcement. The nation’s tariff methodology is similarly flawed and gives “Eskom no incentive to control costs,” he said.

Eskom will be allowed to lift tariffs by 12.74% for the following year, the regulator said.