South African Blackout Woes Ease as Ramaphosa Readies Eskom Fix

(Bloomberg) -- Rolling blackouts across South Africa eased as the government prepares to announce measures to end electricity shortages that are having a debilitating impact on the economy.

Eskom Holdings SOC Ltd. cut supplies for the fifth day on Thursday and warned its power generation system remains “vulnerable.” The reduction is less severe than the previous two days after some units started back up.

President Cyril Ramaphosa said his government will outline plans to address challenges at Eskom on Thursday, while measures on financial support will be announced in the budget statement next week to help the cash-strapped utility stay afloat. The blackouts are “having a devastating impact on our economy and on the ordinary lives of people,” the president said in comments broadcast on eNCA.

“They have their back against the wall,” Ted Blom, an independent mining and energy analyst, said, adding the government needs to rid the company of endemic corruption before spending any more money. “Throwing money at Eskom is not going to solve the problem, they should consider continuing with deep load shedding for a month while fixing all the maintenance issues.”

Labor Protests

The embattled utility, which produces more than 90 percent of the power in Africa’s most industrialized economy, on Thursday removed 2,000 megawatts from the grid after cutting 3,000 megawatts the previous two days. On Feb. 12, when 4,000 megawatts were shed.. Its woes are compounding as Ramaphosa gears up for elections in May, seeks to lure $100 billion in new investment and tries to retain the nation’s sole investment-grade credit rating.

Ramaphosa, who succeeded Jacob Zuma a year ago, announced proposals last week to rescue the utility. They include splitting it into three businesses under a state holding company and giving it financial assistance.

The decision to break up the utility angered the Congress of South African Trade Unions, which is in a ruling alliance with the African National Congress, as it fears it will lead to job losses and privatization. The country’s largest labor federation, with 1.6 million members, called a strike on Wednesday with another protest planned in Cape Town next week.

While South Africa has suffered electricity shortages for more than a decade, the utility is at a crisis point and is seen as the biggest threat to the economy. Eskom expects to report a loss of about 20 billion rand ($1.43 billion) for the year through March, has racked up 420 billion rand of debt and isn’t generating enough cash to service that debt and cover its operating expenses.

“There is a lot of wastage of money,” said Blom. “Eskom is burning about 10 billion rand a month on capital expenditure, which seems to be never ending. The is situation is far worse than what South Africa realizes.”

To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Vernon Wessels, Liezel Hill

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