Eskom keeps the lights on: Eskom's chairman believes load shedding in South Africa is a thing of the past, but is it?

Author:Saigal, Kanika
Position:INTERVIEW - Eskom Holdings Ltd. - Interview
 
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Doing business in a blackout is challenging. Manufacturing shuts down without generators. Signing a contract in a dim room can seem ominous. Driving late at night in downtown Sandton, Johannesburg, without traffic lights to guide you can be--at the very least--disconcerting.

This has been what South Africa's business community has been grappling with for some time. But after years of load shedding and rolling blackouts --the intentional shutting down of electricity to prevent country-wide power cuts--by state-owned power company Eskom, there may be light at the end of the proverbial tunnel. For the last seven months or so, Eskom has kept South Africa's lights on.

"Load shedding is a thing of the past for South Africa," asserts Eskom's chairman, Ben Ngubane. "In fact, I know that we will have surplus power at the end of the year." Plans to export power to neighbours Zimbabwe and Zambia off peak were also negotiated at the end of 2015 when production improved--albeit with a caveat that this may need to be cancelled if Eskom suffers from limited supply on home turf at some point in the future.

For Ngubane, Eskom's recent success has been down to a combination of strong management and, finally, getting South Africa's Medupi power station in the north of the country up and running last March. "Brian Molefe, our new CEO has a great track record. He turned Transnet [South Africa's state-owned transport agency] around and now he's doing the same with Eskom," says Ngubane.

But are blackouts in South Africa really a thing of the past? As Paul Marty, vice president and senior credit officer at ratings agency Moody's says: "The demand for power in South Africa has actually been lower because growth has been so sluggish in South Africa, not because Eskom has been meeting targets. The likelihood of load shedding has reduced because saw a decline of energy consumption by 1.4%."

While Eskom boasts of success, South Africa's economy is struggling. According to the IMF, GDP growth for 2016 will reach just 0.6%, with some analysts and economists predicting a recession. Unemployment, particularly amongst the youth, remains high, and the country is grappling with the worst drought it has seen in the last 30 years. South Africa's mining industry--critical to the economy, has been battered by low commodity prices and labour disputes. All need a reliable power source to help make a comeback.

At the same time, South Africa's currency, the...

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