How South Africa's economy survived Eskom's collapse

Eskom's failure to keep the lights on hit South Africa's economy hard: electricity output fell 10% between 2007 and 2024, and GDP growth slowed from a 2.6% annual rate to just 1.2%. Yet the economy avoided sustained contraction, shrinking only during the 2009 financial crisis and the 2020 pandemic. A key reason is South Africans' own response: businesses and households have installed over 19,000MW of private generation capacity since 2018, while rooftop solar grew from 2,265MW in 2022 to more than 9,100MW by 2026. Private renewables now outgrow Eskom's contribution by far..By Hanno Labuschagne.Eskom’s inability to provide reliable electricity supply hurt South Africa’s economic growth, an analysis by MyBroadband showed.However, the economy has performed relatively well, given the impact of load-shedding and surging electricity tariffs on key industries such as mining, manufacturing, and agriculture.Using data from Statistics South Africa and Eskom, we examined the relationship between electricity production in the country and gross domestic product (GDP) growth over the last four decades.From 1985 to around 2007, the first year of load-shedding, electricity output and GDP grew broadly in step. The amount of electricity generated and the GDP had both roughly doubled up to that point.The compounded annual growth rate (CAGR) was about 2.6% in that period, or a cumulative 75% from 1985.There was a period of GDP contractions in the early 1990s, as South Africa felt the economic impact of global sanctions in response to Apartheid.Between 2007 and 2024, electricity production across Eskom and grid-feeding private power suppliers plummeted by 10%. The average CAGR slowed to 1.2%, while cumulative growth was only roughly 23%.A part of the reduction in energy intensity was due to gains in efficiency, including the use of more efficient appliances and changing energy habits.However, a large proportion of the reduction came from Eskom’s inability to supply reliable electricity due to neglect and mismanagement of its power plants.Even so, South Africa’s economy put up a fight considering the sharp reduction in electricity output and rise in electricity prices.The only years in which the economy shrank during the period were in 2009, which came in the wake of the 2008 global financial crisis, and 2020, which was a result of the COVID-19 pandemic.Part of the resilient performance in recent years can be attributed to South African businesses and households reducing their reliance on Eskom’s electricity supply.Between 2018 and the first quarter of 2026, the National Energy Regulator of South Africa (Nersa) registered over 19,000MW of capacity across larger private generation facilities..The missing pieceAccording to estimates by the National Transmission Company of South Africa (NTCSA), the capacity of “behind-the-meter” rooftop solar systems also grew substantially.Buoyed by severe load-shedding and rising electricity tariffs, the 2,265MW estimated to be installed in June 2022 had grown to over 9,100MW by June 2026.For reference, Eskom had around 7,909MW of renewable power feeding into its grid by that same month. The behind-the-meter capacity is not included in Stats SA’s data.That could help explain the divergence in recent economic growth and electricity production, which has declined even further over the last two years..Read more:.Eskom’s revenue surge sparks debate over soaring electricity costs.According to EE Business Intelligence, the amount of electricity produced by private solar and wind has increased substantially more than Eskom and publicly-procured renewables in recent years.Between 2021 and 2026, electricity generated from these sources increased 550% from about 2,000GWh to nearly 13,000GWh.Over the same period, the contribution of Eskom and publicly procured renewable energy increased from around 15,000GWh to 18,000GWh, reflecting a much slower growth rate of 20%.UCT Power Future Labs emeritus professor Anton Eberhard believes that the annual energy generated by behind-the-meter installations and wheeling will soon surpass state-procured capacity..This article was first published by MyBroadband and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

How South Africa's economy survived Eskom's collapse

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