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EDINBURGH — South Africa’s utility giant Eskom is proving to be a major obstacle to economic growth. Aside from the administrative headaches and costs associated with businesses grinding to a halt amid power cuts, foreign investors are worried about the inefficiencies and huge debts the state-owned entity has built up. International analysts have flagged up a R23bn-a-year government bailout for struggling state utility Eskom as significant cause for concern. Public Enterprises Minister Pravin Gordhan is the bearer of bad news that the government does not know when the blackouts will stop becoming a feature of life in South Africa. However, Gordhan and his team aren’t to blame. As Gordhan reminded the media at a conference on Tuesday, state capture, corruption and general ineptitude in the Zuma years have played major roles in the Eskom crisis. – Jackie Cameron
By Paul Burkhardt
(Bloomberg) – South Africans looking for signs of an end to the latest round of power cuts were left disappointed after the minister responsible for power utility Eskom Holdings SOC Ltd. said he doesn’t have answers yet.
The country is in its sixth day of rotating blackouts – needed to avoid a total grid collapse – as the state-owned utility struggles to bring faulty generating units back online. The staggered cuts known locally as loadshedding leave roads gridlocked across Africa’s most-industrialised economy and stunt business productivity, hitting small companies especially hard.
Eskom staff are working to assess the breakdowns, Public Enterprises Minister Pravin Gordhan said Tuesday. The operational issues at Eskom’s plants were compounded over the weekend by a loss of power imports from neighbouring Mozambique, which was hit by a devastating cyclone.
“I know the most important issue for South Africans is how long will this last and when will you be able to give us certainty that load shedding will end?” Gordhan told reporters. “At this point in time we are still getting a better grasp of the technical problems and other problems that Eskom power stations are confronting.”
Eskom is seen as a key risk to South Africa’s economy. The government last month approved a R69bn ($4.8bn) bailout over three years to help rescue the utility, which is struggling to emerge from years of mismanagement, allegations of corruption and ballooning debt caused by cost overruns at two large new plants. The new facilities – Medupi and Kusile – are not only massively over-budget and behind schedule but also defective and have contributed to the latest outages.
Many of Eskom’s coal-fired power plants are old and unplanned breakdowns have increased after the company fell behind on maintenance as its financial situation worsened.
The company is also spending large amounts of money on diesel to run turbines designed for peak use. It’s used R4.6bn to buy diesel this financial year, well above the allocated R670m, spokesman Khulu Phasiwe said.
Eskom’s operations have reached “crisis level,” Chairman Jabu Mabuza said. It’s also investigating whether to finish the Kusile plant.