As the load shedding rumours doing the rounds in South Africa the past few days have shown, power shortages are a concern not just in the lesser developed countries in Africa, but even in the continent’s economic powerhouse.
Reuters reports that South Africa is in talks with energy intensive users to reduce demand by 5,000 megawatts (MW) or around 13% and prevent blackouts, although a loss in output and jobs were a concern, quoting the energy minister.
South Africa’s national grid nearly collapsed in early 2008, forcing mines and smelters to shut for days and costing Africa’s biggest economy billions of dollars in lost output.
Minister Dipuo Peters said, however, that no forced power blackouts were expected during the June to August months, South Africa’s winter, when demand is expected to peak.
“Business is also challenged with the issues of productivity. If you say they must save, even voluntary or mandatory, 10% (of their energy needs) they say they have the particular challenge of productivity . . . and jobs,” she said. “We are in a Catch 22 situation.”
Peters said South Africa wanted to divert households to liquid petroleum gas, away from the use of electricity for cooking. This measure could reduce the strain on power utility Eskom which is investing heavily in new plants as it struggles to meet fast rising demand. Eskom has said that power supply would be tight for the next five years, and especially until 2013 when its first new power plants come online.
Namibia’s Mines and Energy Minister, Isak Katali, the current chairperson of the Southern African Development Community (SADC) Energy Forum, noted in March that the whole SADC region could suffer a crippling electricity shortfall in the next three years. The minister is worried that the anticipated shortfalls could be more severe than those of three years ago and they are likely to force power utilities across the region to implement tighter load-shedding schedules to avert total blackout. This he said was due to increasing power demand, which has been growing by 3% annually since 2008.
At the end of 2010, peak demand stood at 45,721 MW, while the region requires 50,400 MW to maintain the current 49,800 MW utilised in the region. The region has the capacity to generate an additional 17,000 MW, but, said Katali, the region is still trapped in pre-planning stages.
It is unlikely that governments alone will be able to tackle the power deficit, and initiatives to involve the private sector will need to be pursued more aggressively. The Power Indaba Summit held in Cape Town in March highlighted that power projects in Africa are increasingly viewed as attractive investments by both foreign and African investors, but that the investment imperative and how to harness what is available in terms of financing and making it work for Africa would be key.
Article written by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets..