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Blog : 9 November 2016 (Electricity supplied vs GDP)
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In most countries it is assumed that there will be a constant source of power. While this is usually the case, it is not in South Africa. In 2008, South Africa was hit by rolling blackouts and then planned electricity cut offs called "load shedding" in order to save the grid from total collapse. Without a constant and stable supply of power businesses will think twice about expanding or even continuing to operate in country. And foreign investors will think twice about investing in a country were power cannot be guaranteed to them.
We take a look at the growth in South Africa's power output per year and compare it to the growth in South Africa's economy. |
Electricity vs GDP
The graphic below shows number of Gigawatt-hours produced (average of each month grouped per year) vs GDP (average of each quarter grouped per year).
From the graphic above it is clear that they do follow very similar trends until about 2011, where a large divergence starts taking place. As the electricity produced keeps on dropping, the economy is still growing (albeit sluggish growth). Now we have written in the past about ESKOM and their claims that there will never be loadshedding again due to their improved maintainance and bringing older stations back on line and new power units coming online. (We even argued slack from ESKOM is being picked up by independent power producers). Read those articles here and here.
Based on the graphic above it is clear that more power is not being produced in South Africa, yet there is no more loadshedding and and the economy is still growing? A few possible reasons can be given for this:
Based on the graphic above it is clear that more power is not being produced in South Africa, yet there is no more loadshedding and and the economy is still growing? A few possible reasons can be given for this:
1. More efficient power users (be it households or businesses). More energy efficient bulbs, more households using gas stoves and solar geysers etc.
2. Lower demand due to sluggish economy. Since the economy is not growing at levels seen in past years, the demand for electricity is not as high as it used to be in the past, therefore the need to produce more power is not there. One industry that stands out in this case would be the mining industry. Since the demand for commodities world wide slumped in recent years the need to have massive smelters drawing huge amounts of power from the grid is no longer there. Thus freeing up electricity for the rest of the grid and making it easier for ESKOM to keep the lights on.
The question is whether this is the case. And if it is, is this giving ESKOM a false sense of security? What happens of demand for commodities rises sharply again and we need the massive smelters to be running at full speed again? Will the grid survive this? Or will ESKOM fall into it's old habits of blaming past maintainance not being done and blaming the quality of the coal it receives (one wonders if they should blame coal suppliers as some of their suppliers were obtained via dodgee circumstances (See Public Protector report in "The State of Capture".
If one looks at the year on year growth rate in the average Gigawatt-hours produced a month grouped per year one can see that it shows that ESKOM has not been producing more power to see off loadshedding. Not even close to it. Since 2011 total Gigawatt-hours of power produced has declined by about 6%, while at the same time the economy has grown roughly 6%.
The decline in Gigawatt-hours produced yet modest economic growth points to the fact that businesses have made due with less power in recent years while at the same time managing to achieve very modest growth. While this is a good sign, one wonders what the situation would have looked like if there was no loadshedding and businesses didn't have to worry so much about a stable electricity grid. How many projects were cancelled or downscaled due to loadshedding and the fear of not having a stable electricity grid?
Looking at both the graphics in this article, it is clear that ESKOM has made NO progress since the height of loadshedding. With power produced steadily declining from 2011. If ESKOM can handle and supply more power than what is currently produced, let them advertise it to the world that South Africa is open for business and can supply a stable electricity grid to businesses. If they dont advertise it to the world, one wonders if their maintainance and new power units have helped at all in keeping loadshedding at bay? One can then safely assume no loadshedding is more related to lower demand and more efficient energy usage than a more efficient and effective ESKOM. And without ESKOM stating what amount of power they can supply safely to South Africa, how are businesses (both local and foreign) supposed to know if the grid can handle large projects and expansions in South Africa?
Looking at both the graphics in this article, it is clear that ESKOM has made NO progress since the height of loadshedding. With power produced steadily declining from 2011. If ESKOM can handle and supply more power than what is currently produced, let them advertise it to the world that South Africa is open for business and can supply a stable electricity grid to businesses. If they dont advertise it to the world, one wonders if their maintainance and new power units have helped at all in keeping loadshedding at bay? One can then safely assume no loadshedding is more related to lower demand and more efficient energy usage than a more efficient and effective ESKOM. And without ESKOM stating what amount of power they can supply safely to South Africa, how are businesses (both local and foreign) supposed to know if the grid can handle large projects and expansions in South Africa?