South Africa’s Public Utility Company Struggles to Keep the Lights On

Arnot Power Station, one of many aging coal-fired power plants operated by Eskom, provides electricity throughout South Africa. (Wikimedia Commons)

Eskom, South Africa’s largest public utility company, has struggled to meet the nation’s energy demands in recent weeks, leading to frequent “load-shedding,” or power cuts. The company, owned by the South African government, has had difficulty meeting consumer demand for a long time. However, the recent power cuts have been particularly severe. Many analysts fear that the cuts may impact South Africa’s economic growth in the first quarter of 2020. 

The cuts have occurred due to Eskom’s poorly preserved power production infrastructure. The utility, which produces nearly 95 percent of South Africa’s electricity, relies heavily on a fleet of aging coal power plants. Malfunctions in these plants lead to power cuts. Eskom sometimes warns consumers when “load-shedding” will occur, but Al Jazeera has called the power cuts “sporadic.”

In an effort to remedy the situation, the government asked Eskom’s new CEO, Andre de Ruyter, to begin work two weeks early in an effort to stabilize the struggling utility. However, Ruyter, in his short time at Eskom, has already proven to be a divisive figure. Many of the company’s unions did not support his appointment, as they feared he would fire employees in an effort to cut costs. 

Ruyter was chosen by the government to oversee a large scale reorganization of the company, which entails breaking up the utility into three separate companies, each fulfilling one of Eskom’s current duties: generation, transmission, and distribution. Additionally, he has been tasked with restructuring the company’s $31 billion debt. There is hope that he will control costs for the production of two large power plants, both of which are over budget and behind schedule.  

Although the power supply has stabilized and the utility has indicated that it does not believe any more power cuts will occur in the near future, Eskom remains in a precarious position. The company believes it will struggle to meet South Africa’s energy demands over the next several months.

Uncertainty over the nation’s power supply has worked to undermine investor confidence. In the past, investors have found South Africa to be an unattractive market due to its inconsistent power supply. Recently, Goldman Sachs Group Inc. described the company as the “biggest threat” to the South African economy, an assertion which is buoyed by the fact that similar cuts last year pushed South Africa “to the brink of recession.”