Load shedding is driving SA’s rapid energy revolution

An important effect of load shedding that no one is really talking about is the energy evolution it is causing in South Africa, says JP Landman, political and trend analyst.

The “gatvol” (fed up) factor and the negative destructive effect of load shedding is pushing the country very fast on its energy revolution journey. SA will see investments of around R1.5 trillion in energy alone over the next five to six years.

This will lift productivity, relieve energy constraints and bring better growth.

Speaking at a Nedbank ‘changing times’ webinar Landman said the energy system and Eskom, as the main generator of electricity, will not survive in their present format.

The end of load shedding

Load shedding will be over by the end of next year, he said, reiterating his forecast of August last year. There are currently 17 different investment projects in renewable energy under way – most of them by the private sector.

Landman refers to analyses from energy experts who foresee the installation of 5 000 megawatts (MW) of renewable energy and battery capacity by the end of this year or early next year. This will reduce load shedding by 61%.

By the end of 2024 SA could have 18 000MW of renewable energy, which will eliminate load shedding altogether. But predictions that load shedding will be something of the past within the next six to 12 months are utter nonsense, says Landman.

Nedbank chief economist Nicky Weimar says the economy is deeply wounded and will remain fragile this year. The bank’s 2023 growth forecast is 0.4%, compared to the 0.3% of the South African Reserve Bank and the 0.1% of the International Monetary Fund.

National Treasury forecasted growth of 0.9% for 2023 in the February budget. “We may see a pick-up next year, but our growth is confined to less than 2% and not only in 2024 but even beyond that,” Weimar notes.

High and sticky inflation

The Reserve Bank again announced a 50 basis points increase in the interest rate on Thursday.

Read: Sarb hikes repo rate by 50bps

The economy continues to lose momentum and this begs the question why the bank has not started cutting the rate in order to stimulate economic activity.

The reason, says Weimar, is an inflation rate that remains high and sticky. Despite expectations that it would come down in February it increased from 6.9% to 7%.

She adds that core inflation (excluding food and energy costs) is increasing and inflationary pressures have become more broad-based than just from food and energy.

“There is no perfect way of fighting inflation, there is only a painful way,” says Weimar.

“The only way we as economists and central bankers have that is effective is interest rates.”

Elections

Turning to politics and the 2024 general elections, Landman warns against talking about a coalition government. And the idea that there could be a government of national unity that excludes the ANC is “absolute nonsense”.

It is still very realistic that the ANC could come out of the election as the single biggest party.

Read: ANC may hold onto majority in 2024, survey shows

If the ANC gets less than 50% Landman believes its “first port of call” for a coalition partner will be the Inkatha Freedom Party (IFP) and not the Economic Freedom Fighters (EFF), as many are speculating.

The second port of call will be either be the Democratic Alliance (DA) or the EFF.

Potential president Paul Mashatile has had some bad experiences with the EFF as a coalition partner – in Johannesburg, Ekurhuleni and more recently in Tshwane.

Landman believes there is a reasonable chance that South African politics will reconfigure in a different way.

“I do not buy the line that it is automatic that the EFF and ANC will get together. There are still too many obstacles.”

Dark clouds and silver linings

There are some really dark clouds on the horizon and Weimar warns investors to prepare for volatility. They need “insurance” against this in the form of low risk investments such as money market funds. “People need to diversify and stock up on low risk, solid assets,” she advises.

Landman believes there is a silver lining in the form of resilience and innovation from within society and even in our politics.

Read: How one major landlord is using solar and batteries to power its malls

SA is in a similar position as in the late 1980s and he senses the same kind of energy that pulled us through during some very troubled times.

“We are in a difficult spot but we will get out of it,” he says.

And no, SA is not a failed state. It is really a “lazy term”, he says. There are sections of government that are failing but there are also institutions that are working well such as the Reserve Bank and the South African Revenue Service.

The National Prosecuting Authority is not there yet, but it is making good progress. On top of that we have a world class financial and banking system.