For 15 years, South Africa has dealt with unreliable power supply, and it’s gotten worse recently. Major cities and rural areas go without electricity for hours daily, resulting from insufficient capacity from an indebted state monopoly power company. Officials are scrambling to solve the problem, and might want to look at the market solutions they’ve long disavowed.
I saw the problem firsthand from day 1 in Cape Town, the first African stop in my 1.5-year Global South tour. Lights would flicker on-and-off, temporarily cutting out internet. Of course I was privileged to be in a fairly-upscale hotel for tourists, which could afford to deploy backup generators. But many South Africans just live hours without power, and public infrastructure also suffers.
South Africa’s population has grown fast this century, as turmoil in other African countries draws refugees. And as of 2021 its urban population share was 68%. But its power plants cannot produce sufficient power to meet demand. In order to keep the underequipped grid from failing, the power supplier must deliberately cut power, in a practice called “load shedding.”
NPR reports that nationwide, this happens about three times daily, although while in Cape Town I found it was more like 5-10 times daily. This typically leads to six hours of power loss nationwide daily, but can be double that. One source projected that as of November 2022, load shedding occurred over 1,900 hours.
Compounding the problem is the country’s simultaneous reliance on coal and commitment to reduce it. The overwhelming majority of national power is generated from coal, but as plants age and coal falls out of fashion for environmentalists, the country faces mandates to reduce this production method. Even while all this load shedding was happening, the country announced an $8.5 billion program to reduce coal power.
The president has also declared a national emergency, enabling for reductions in bureaucracy and freeing up funding, while appointing a director of power supply to handle the problem. But the power company will need substantial reform to reverse this ongoing crisis.
All of South Africa’s power is supplied by a single company, Eskom. The utility is a state-controlled enterprise, although it has a profit mandate. Previously, power companies in South Africa had been both publicly- and privately-owned, as the country’s mining economy grew in the early 20th century. But these were agglomerated into Eskom.
The firm was once a highly-regarded example of a state owned enterprise; as recently as the mid-2000s, it was praised for having low debt and operating with minimal subsidy. But by 2019, the picture was far different; its debt accounted for 15% of overall debt in South Africa. Today it sits at $23.5 billion, reports Reuters.
The crisis was foreseeable. As far back as 1997, Eskom’s leadership warned of the need for load shedding if power expansions were not brought on line. But debt and corruption inhibited the company from providing this and many plants went into disrepair. Consequently, writes Anton Eberhard for The Conversation, “the performance and availability of Eskom’s power stations has declined from above 90% in the early 2000s to an average of 64% in the 2021 financial year.”
The Role of Corruption
Most observers point to pervasive corruption at Eskom from the start. State businesses were widely corrupt during the tenure of the previous president, Jacob Zuma, who “appointed loyalists—sometimes with little experience—to … top positions at state companies” including Eskom, writes The New York Times. In April 2022, a lengthy report on Eskom’s practices called for its board to be prosecuted. Eskom was allegedly targeted by a fraud scheme involving allies of Zuma. The former chief executive, Andre de Rutyer, claims the company loses at least $55 million to theft monthly.
Some accuse de Rutyer as a party to corruption, with one whistleblower saying he “‘perfected’ corruption” within the company and others leveling discrimination allegations. For his part, de Ruyter has leveled his own allegations, claiming to have survived an assassination attempt and alleging that an unidentified senior government official facilitated graft at Eskom. As of this writing, the dueling accusations very much continued.
Impact on Day-to-Day Life
Clearly, load shedding disrupts daily life, sometimes in dangerous ways. It’s not uncommon for individuals to be trapped in elevators, and lack of street lights worsen the country’s crime epidemic, which is already Africa’s worst.
The economic impact is catastrophic. As Foreign Policy reports, GDP growth has sat at just over 1.3% a year since 2007, and a daily cost of load shedding is as high as $232 million. Some estimate that South Africa’s economy is 17% smaller as a result.
Small businesses are hit particularly hard. Either vendors must manage to complete all power-involved activities before load shedding occurs for the day, or they must buy fuel and generators at great personal (and environmental) expense. And of course, internet access, a key component of modern commerce, is nonexistent for anyone without generators.
Unsurprisingly, load shedding produces political turmoil, exacerbating an already unstable government. South Africa’s current president, Cyril Ramaphosa, was elected as a reformer following Zuma’s scandals. But the energy crisis threatens to oust his government too.
“People in businesses in general, they do not buy the idea that within a space of 12 to 18 months, we are going to see some improvement,” African Liberty fellow Phumlani Majozi told South African media in March 2023.
Power blackouts are not unique to South Africa—I’ve found them common in other African countries I visit. Under a quarter of sub-Saharan Africans have energy. But South Africa’s crisis spreads beyond its borders, because Eskom supplies neighboring states.
Yet as load shedding has become part of daily life, residents have adapted as best as can be expected. For instance, drivers know traffic lights will stop functioning when load shedding occurs, and informal rules have emerged. People volunteer in guiding traffic. Residents have nonperishable food, and regularly set bonfires to stay warm.
Would more competition help?
Ending load shedding requires capacity expansions and a reckoning with the global coal market (and efforts to phase out coal). More broadly, the crisis raises the question of whether a state-run utility is the best way to provide power. The corruption and underinvestment at Eskom demonstrates the dangers of such monopolies.
The country has restricted power sources not provided by Eskom, says Financial Times’ David Pilling, a protectionist scheme designed to favor big coal companies. Into 2022, South African authorities prohibited the amount of renewable energy that could be fed into the grid. Despite its commitments to reduce coal, the government wants to prevent what it fears would be an excessive loss of coal jobs, motivating the restrictions.
“There is a way to fix the power problems,” writes Pilling. “It involves a massive increase in privately produced electricity and a loss of Eskom’s generation monopoly.”
Some have argued that solar power in particular could prove advantageous for the country. South Africa has previously attempted to expand nuclear power, but the cost has proven prohibitive and lead times are long.
A move towards more energy market freedom is broadly associated with better service quality. According to World Bank research, introducing competition in contrast with monopolies like Eskom “is associated with higher electricity access [and] better consumer affordability.” The last point is somewhat contentious; recent experience in America suggests otherwise, but there are numerous confounding factors. But it’s certainly worth trying in South Africa, given its multi-decade energy catastrophe.
Cover image use authorized under Creative Commons Attribution-ShareAlike 4.0 license.
Graphic Credit: The Market Urbanist.
Catalyst articles by Scott Beyer | Full Biography and Publications