Friends talk by candle light during load shedding in Embo, KwaZulu Natal. Picture: REUTERS/ROGAN WARD
Friends talk by candle light during load shedding in Embo, KwaZulu Natal. Picture: REUTERS/ROGAN WARD

Let’s not mince words: severe, prolonged load-shedding would be a disaster for SA’s economy. It’s hard to imagine anything more damaging than the government failing to keep the lights on.

Six months ago, SA was thought to be on the cusp of a revival, with most economists forecasting growth of about 1.5% this year. Since then, the consensus has fallen steadily. After the latest bout of load-shedding, it’s doubtless closer to 1%.

The economy could probably negotiate further stage 1 and 2 load-shedding without too much difficulty (we’ve certainly had enough practice), but if SA experiences severe, extended load-shedding, in a replay of 2008, we’ll be lucky to escape a recession this year.

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Moody’s, which is due to review SA’s ratings next Friday, must be scrutinising the authorities’ every utterance for a sense of whether they are anywhere close to getting on top of the situation.

Eskom is blaming the current crisis on diesel shortages and transmission lines from Mozambique’s Cahora Bassa project being damaged in a tropical cyclone. But the deeper systemic problem has its roots in Eskom’s philosophy of keeping the lights on at all costs, which it pursued for much of the past decade.

It resulted in a severe maintenance backlog, run-down plants and a reserve margin so thin that every incident creates a major systems issue. Add to this pervasive corruption, maladministration and a skills flight, and you have the teetering monolith that is Eskom today.

"There is no single solution to the problems at Eskom," President Cyril Ramaphosa said during the state of the nation debate. "Neither restructuring, nor refinancing, nor cost-cutting, nor tariff increases, nor better plant maintenance on their own will have the necessary effect. We need to pursue all of these measures and more, simultaneously, in a co-ordinated manner, and with purpose, to turn the utility around."

But South Africans still have no real idea what the Eskom turnaround plan contains, how well it is being executed, or how long or how intense the current electricity outages are likely to be.

Experts say stage 4 load-shedding on a weekend is unprecedented, especially in summer. This has sparked fears that the crisis at Eskom may be bigger than we thought. We just don’t know. We are being kept, quite literally, in the dark.

What Moody’s thinks about Eskom really matters, as it’s the last of the three main ratings agencies to rate SA’s debt at investment grade. To the extent that Eskom’s predicament is the consequence of past actions, Moody’s might just allow SA to retain its investment-grade rating for now.

But what will happen over the medium term if that turnaround plan is slow to deliver? SA is banking on a sustained growth upswing to create jobs and stabilise public finances. But achieving that will depend heavily on Eskom. Quite simply, if the government can’t fix Eskom, the economy won’t grow, debt will balloon and SA’s rating will ultimately be junked by Moody’s.

It seems likely that Moody’s will change its outlook on SA to "negative" this week as a precursor to a downgrade in November. Of course, it might be too soon to write off any improvement in SA’s growth prospects this year, especially if global growth holds up. But it will be touch and go.

The only hope is that, because the consequences of not fixing Eskom are so dire, the government will do whatever it takes to salvage the situation. But now is the time for Ramaphosa to explain to the nation exactly how this will be done, and the timelines involved. With business confidence collapsing, he can no longer afford to keep SA in the dark.