ACTING Eskom CEO Brian Molefe has been making soothing noises about load-shedding, arguing that the lights are on 96% of the time for SA. Even if that were indeed reassurance, big industrial customers are not so lucky.
In addition to load-shedding, Eskom has also been doing "load curtailment" regularly by asking large industrial and mining customers to cut their demand by up to 20% as an emergency measure.
The strain is starting to show in a major way in the manufacturing sector, with the Kagiso purchasing managers index (PMI) falling to its lowest level in four years last month, and the business activity component of the index now back down at the level last seen in August 2009, when the economy was just recovering from the global recession.
The PMI is based on a survey of manufacturers and tends to be a good predictor of the statistics on actual manufacturing activity. It’s likely that the manufacturing sector will have contracted in the first quarter, by about 3%, Investec’s Annabel Bishop estimates.
The gloominess of the April PMI suggests the second quarter could again see a contraction, so that the manufacturing sector would technically be in recession.
It’s still early, so we can only hope for better days and that Mr Molefe does indeed get a grip on the Eskom crisis.
At least more work might get done, in manufacturing as in other sectors, during the rest of the quarter. The large number of public holidays this month contributed to the slide in the PMI. That, plus the disrupted electricity supply, tends to raise costs significantly for businesses at a time when order books are far from full. Not surprisingly then, the six-month view emerging from the PMI survey is a gloomy one, with expectations of business conditions declining for the third consecutive month.
SA is not totally out of line with global trends: Barclays reports its global manufacturing confidence index dropped last month to its lowest in two years, on concern about China. In SA’s case though, the slide has been sharper, and the problems are primarily domestic.
SA’s woes are of our own making — so it is presumably within our power to fix them.