President Cyril Ramaphosa cut short a trip abroad to deal with an escalating crisis at the state power company, which imposed a sixth day of blackouts that threaten to tip the economy into recession.
The rand declined the most in a month on Tuesday as Eskom said there is a high likelihood of power cuts all week and mining companies including Sibanye Gold, the world’s biggest platinum producer, temporarily halted operations. Vodacom Group, the nation’s biggest mobile operator, said the outages are disrupting its service.
Ramaphosa is en route back home from Egypt, having terminated his trip a day early to “attend to urgent domestic priorities,” the presidency said in a statement. Eskom management said it will brief the president on Wednesday morning on “plans to mitigate and resolve the current electricity crisis”.
Eskom, which supplies 95% of the power used in Africa’s most industrialised economy, has struggled to meet demand for power since 2005, due to its failure to properly maintain ageing power stations and invest in new ones. The latest round of outages were caused by simultaneous breakdowns at several plants and were exacerbated by heavy rains that caused flooding and soaked coal stockpiles.
The company implemented a record level of cuts – 6 000 megawatts (MW)– to prevent a total collapse of the grid late Monday, and plans to cut 4 000 MW until late Tuesday. A total of 15 200 MW of installed generation capacity had been rendered unavailable, the utility said.
The rand fell 1.2% to R14.84 per dollar by 16:49 in Johannesburg, making it the worst performer among emerging-market currencies. The economy contracted an annualized 0.6% in the third quarter, and the latest power deficit has compounded the risk of a recession.
The Department of Mineral Resources and Energy said in a statement that it is considering short- and medium-term interventions to address the electricity shortage. These include allowing independent power producers to bring capacity on stream earlier.
Besides Sibanye, Impala Platinum Holdings, Harmony Gold and Petra Diamonds said production had been interrupted and that they are assessing when to resume output. Palladium rose above $1 900 an ounce for the first time and platinum headed for the biggest daily gain since September.
‘Perfect storm’ for Cape Town
In Cape Town, the nation’s biggest tourism hub, which is gearing up for the year-end holiday season, the city council warned that if the power cuts intensify, it could interrupt water supplies.
The outages and heavy rains are creating a “perfect storm” for insurance companies, said Christelle Colman, a spokeswoman for Old Mutual’s property and casualty insurance unit. High levels of claims are expected due to foods spoiling in freezers, power surges damaging electronics, an increased number of vehicle accidents and additional incidents of theft, she said.
Vodacom and MTN Group, Africa’s largest wireless carrier, both said the power cuts were affecting their mobile phone towers and batteries.
“Our towers do use batteries as a back-up, but these do have limited power and will eventually fail,” Vodacom spokesman Byron Kennedy said.
South African Weather Service forecasts show that rain in Mpumalanga, the province in which most power plants are located, will continue until Friday.
© 2019 Bloomberg L.P.