Power Failures Take Toll on the Economy

Power outages represent a significant cost to the South African economy, and by implication the Western Cape economy, especially in our labour-intensive industries. In 2008, blackouts cost the national economy an estimated R200 million per day, and in total, almost half a trillion rand.

Businesses in our province have expressed their concern at the losses they have already faced as a result of the surprise blackouts earlier this month.

Indications are that Eskom’s power generation capacity remains under severe strain, and that we may face a large-scale crisis and sustained power cuts into the winter of 2014.

Each outage has clear costs to the economy, including the following:

• Outages cause a break in manufacturing operations which can result in items in production lines being spoilt;
• During outages, business carry the cost of labour and equipment that is not being effectively employed;
• According to research group Global Continuity, power outages are the second leading cause of business interruption in South Africa, accounting for approximately 14% of cases of business interruption;
• Outages cause disturbances in everyday logistics. For instance, non-functioning traffic lights cause traffic disruptions, with a cost to ordinary firms and private citizens;
• Outages impact on public transport and cause millions of workers to arrive at work late and leave work early in order to manage the trip home;
• The threat of outages as winter approaches means that many businesses have to rely on generator sets – often not the most cost-effective manner of generating power.  This represents not only additional operational costs, but the cost of buying power generation equipment must also be taken into account;
• Businesses also have to put in place effective business continuity management programmes in order to avoid financial and legal repercussions that may relate to power outages through, for example, missed delivery deadlines or spoilt products;
• Large electricity users are currently reducing demand (at the cost of their own output) in order to assist Eskom with the management of supply. The economy is not producing the output that it should. This is hindering the growth of exports;
• Uncertainty about power supply in the longer term impacts on decisions by foreign and local investors. Given the need to accelerate economic growth, investors require a clear signal that the country has enough electricity and other forms of energy to drive a modern industrial economy, thereby making potential investments profitable.

The ANC in government has run our energy production facilities into the ground, and it’s only due to get worse. Eskom has indicated that load shedding is unavoidable for months if not years to come. With sound management of our current power stations, and of the Medupi project, the effect of load shedding on growth and jobs could have been avoided.

Where the DA governs, we are doing everything that we can to ensure energy security.

In the Western Cape, this includes a concerted push to move to green and renewable energy sources.

Indeed, we have devised a Green Economy Strategic Framework which seeks to position the Western Cape as the lowest carbon province in South Africa, and drive job creation in this sector.

We have set funding aside to develop an electricity master plan for each municipality in our province.

Because one company’s waste might be a resource for another, we have invested in a symbiosis project which is creating links between companies wishing to buy one another’s by-products for use in their own production processes. This project is saving input costs for business and helping us to protect the environment through the reuse of waste which would traditionally have contributed to our landfill sites.

Other initiatives to bolster the green economy include investigations into reducing our reliance on coal in favour of Liquefied Natural Gas, the 110% Green flagship project through which businesses commit to reducing their energy consumption and a mapping project which will provide data on the renewable energy, agro-processing and eco-tourism sectors.

The City of Cape Town is equally committed to bolstering the green economy. In January this year, the City announced that it would be retrofitting its operations to achieve greater energy efficiency. This includes building retrofits, and even changing our street lights from incandescent to LED lightbulbs. The City is also pursuing the roll out of net metering which will allow small energy producers to feed back into the grid.

The City of Cape Town and Western Cape Government have put a plan in place to make Atlantis the heart of green economy manufacturing in the province.

Two years ago, the City of Cape Town proactively identified portions of land at competitive rates in Atlantis for manufacturers producing products and services related to the green economy.

Both the provincial government and the City of Cape Town also worked together to reduce the burden of red tape by obtaining environmental clearance for industrial activities on the land.

These efforts yielded results. GRI Renewable Industries, the wind industrial division of international company Corporation Gestamp has revealed that it will be opening a wind tower manufacturing facility in Atlantis this year. It will be fully operational by the second half of 2014 and will create around 200 direct local jobs. The total project investment will be around R333 million. There are also discussions underway attract a wind turbine blade manufacturer to Atlantis. It is clear our work to reduce bottlenecks over the last two years is starting to pay off.

In the Western Cape, we will not allow the productivity of our businesses to be held back by the failure of the national government to ensure our energy security. We are doing everything in our power to make sure that our people and our businesses have the power they need to grow our economy and create jobs.