The economic consequences of load shedding

[Dave A]

We have massive losses in the mining sector.

The "nightmare" of South Africa's major gold, platinum and diamond mines shutting down because of power failures became a reality on Friday.

"Tens of millions of rands a day are being lost. It's a nightmare," said T-sec chief economist Mike Schussler.

The JSE gold mining sub-sector closed almost 6% lower on Friday. The move contributed to the gold price rising. The London afternoon fixing was up $12, to $918,25 an ounce.

Chris Hart, an Investment Solution economist, said mining was a key industry for the country.

"From that point of view the [power] cuts seem ... almost a disaster."

The Chamber of Mines earlier announced that several gold and platinum mines had to shut down operations because Eskom could not guarantee power supplies on Friday.

Harmony Gold spokesperson Amelia Soares said the company had only run emergency facilities on Friday.

The company would lose about R60-million from Friday's suspended operations, she said.

Gold Fields spokesperson Willie Jacobsz said the company was losing production of about 7 000 ounces a day.

The impact of power cuts was "very, very dramatic. It is radical ... unprecedented," he said.

AngloGold Ashanti said it had halted mining and gold recovery operations throughout the country.
full story from M&G here

[duncan drennan]

I found this quite chilling,

Apparently Eskom faces a bill of more than R7 billion to get its coal stocks back to about 20 days. They are currently precariously poised at between 2 and 3 days supply. And the quality of the coal has been affected by excessive rain.

From energycrisis.co.za

Do you think the coal mines are still receiving energy? Are we balanced on the knife edge of moving from crisis through to disaster?

[Dave A]

The same article I quoted above reported coal mines as running at full speed to keep Eskom fed.

I actually read a number of articles today trying to get a sense of the problem.

You know that a motorcar engine has a red line? A point at which you start doing significant permanent damage? I get a sense that Eskom has been redlining the generators that are online and some have started popping.

[murdock]

give these people rubber mallet and they will break it.

[irneb]

Apparently Eskom faces a bill of more than R7 billion to get its coal stocks back to about 20 days. They are currently precariously poised at between 2 and 3 days supply. And the quality of the coal has been affected by excessive rain.

Now, what happens if Eskom cuts the power to the coal mines as well ? That's something like shooting themselves in the foot and the arm and the head, etc. But I wouldn't be surprised, they've already turned the power to their own admin offices off (at least once).

[Dave A]

South Africa, which had forecast five-percent annual growth until the end of the decade, will struggle to hit half that figure owing to its electricity crisis, economists warned on Tuesday.

"It's a question of if we can get the growth to three percent which, given the crisis the country finds itself in presently, I don't think we will," said Mike Schussler, senior economist at Johannesburg-based brokerage T-Sec.

"We may have to settle for at least two percent, depending on the severity of the crisis."

Presenting his annual budget last February, South Africa's veteran Finance Minister Trevor Manuel painted a rosy picture of the nation's economic future, predicting growth would be at least five percent in the coming three years.

But while the government has yet to concede its plans have been blown off course, economists say the drastic shortage of power which has forced daily blackouts will inevitably lead to a smaller level of growth.
extract from Business Report here

More than just current losses, there would seem to be a long term effect.

[irneb]

More than just current losses, there would seem to be a long term effect.

Not to mention companies deciding to close shop now, because they can't make a profit during this crisis. Especially those in the industrial sector which have very long turn-around times for their equipment, for a 2 hour power cut they may loose up to a day (or even more). That may even trigger a negative growth, i.e. rising unemployment.

Also, foreign investment will take a long term knock. Because it will take some time to get the stigma of a "powerless" country out of their minds, even if we can get around this crisis in the near future (the damage has already been done).

[siya2008]

hi
This is an economy issue + politicians failure = economic decline

I will briefly explain the above formula. When eskom presented a new plant project (economy issue) to Thabo Mbeki he was happy and he forget to ask(politicians failure) eskom disadvantages of this project. Today community and business are suffering(economic decline)

[IanF]

Who will be accountable for this and what will happen to them. I see no leadership from either our President or the CEO of Eskom on this crisis. That is disappointing.

[Dave A]

I see no leadership from either our President or the CEO of Eskom on this crisis.

I think they are too busy ducking shrapnel. What we have seen so far is a panic response - there is very little evidence of a carefully considered and planned response to this.

I don't know about how everyone else is going, but this week I've suffered no load shedding anywhere. Has load shedding in the cities been reduced? It would seem so.

Where has the extra power come from to keep the cities running? The mine shut down. Apparently the mines account for about 17.5% of the total load.

The mines were informed that they could not rely on getting the power they needed. They had no choice but to shut down. Effectively, they were load-shedded as surely as if someone threw the switch.

Who made the decision that the mines might be load-shedded?

More importantly, why was that decision made?

Were the mines traded in an attempt to pacify the people?