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South Africa plans bail out for utility firm Eskom as Load shedding soars

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South Africa’s minister of finance Enoch Godongwana has identified  electricity crisis as the biggest economic constraint the country faces.

Speaking while presenting the 2023 financial budget, Mr Godongwana observed that record levels of load shedding were experienced in 2022 – 207 days of load shedding compared to 75 days in 2021.

South Africa has reached an unprecedented level of rotational power cuts that is seriously affecting businesses.

Eskom cut 7,045 megawatts from the grid, spokesman Sikonathi Mantshantsha said in a Tweet on Tuesday.

And each 1,000MW represents a stage of load-shedding, and Bloomberg reports that Mantshantsha has effectively confirmed that Eskom had quietly moved to stage 7.

But for Mr Godongwana the government is working to ensure things return to normal.

“We are acting decisively to bring additional capacity onto the grid. We are also working to transform the electricity sector to achieve energy security in the long- term,” he told parliament.

The government will take over a portion of Eskom’s debt to ease pressure on the company’s balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity.

A total debt-relief arrangement for Eskom of R 254 billion is being proposed.

This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term. Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.

Godongwana also stressed the need to move towards a low carbon economy.

“Part of addressing the persistent electricity supply shortage must involve implementing a just transition to a low carbon economy. Climate change poses considerable risks and constraints to sustainable economic growth in South Africa.”

“Our Just Energy Transition plan addresses these urgent climate challenges. It aims to significantly lower emissions of greenhouse gases and harnesses investments in new energy technologies, electric vehicles, and energy-efficient appliances,” he said.

“Most importantly,” he added,”it ensures that communities tied to high-emitting energy industries are not left behind, and are provided with new skills and new economic and employment opportunities.”

South Africa, through its role in the G20, the IMF and the World Bank, has stressed that developed nations could do more to support the energy transitions of developing nations, especially by ensuring that the financial support includes a much larger grant- funding component.

Experts have warned that unless there is a trend-reversal and drastic improvement in the reliability of Eskom’s coal fleet, South Africa could see much higher stages of load-shedding in 2023.

Although Eskom, continues efforts to maintain and repair infrastructure, unplanned events such as unit breakdowns, are likely to continue to occur which will force Eskom to implement load shedding to prevent a total blackout.

Effects of load shedding

Load shedding requires switching off parts of South Africa’s electric grid in a planned and controlled manner due to insufficient capacity or to avoid a countrywide blackout. The higher the stage, the more electricity needs to be saved and the longer the blackouts last for.

Temporary commercial and communications disruptions are possible while load shedding and unscheduled disruptions are taking place; cellular and mobile services could be affected. Traffic disruptions and longer driving times are possible during these periods due to malfunctioning traffic signals.

Trains may also experience delays if outages impact signaling devices or overhead wires. Power outages could also result in the temporary unavailability of essential services such as ATMs and filling stations. Water supply outages or decreases in water pressure may occur in areas that rely on electrical pumps for water flow.

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