Ramaphosa to meet Eskom after cutting short Egypt trip

President Cyril Ramaphosa cut short a trip abroad to deal with an escalating crisis at the state power company, as week-long blackouts threaten to tip the economy into recession.

The rand declined the most in a month on Tuesday as Eskom said there’s a high likelihood of power cuts all week and mining companies including Sibanye Gold, the world’s biggest platinum producer, temporarily halted operations. Vodacom, the country’s biggest mobile operator, said the outages are disrupting its service.

Ramaphosa returned from Egypt, having terminated his trip a day early to “attend to urgent domestic priorities”, the presidency said in a statement. Eskom management will brief the president on Wednesday morning on “plans to mitigate and resolve the current electricity crisis”, it said.

“As plausible as some of the explanations that Eskom is putting forward are, it’s really not sufficient,” Ramaphosa’s spokeswoman Khusela Diko said. “We are supposed to ensure that we are on top of issues of maintenance and we are supposed to ensure that we are able to forward plan,’’ she said in an interview with SAfm on Wednesday morning.

Eskom, which supplies 95% of the power used in South Africa, 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.

Record cuts

The company implemented a record level of cuts — 6GW — to prevent a total collapse of the grid late on Monday. The utility scaled down the level of cuts to 2GW on Wednesday as it made “good progress” in the recovery from flooding at its plants and returned several units as scheduled. Breakdowns were at 13.3GW early on Wednesday morning, it said in a statement.

The rand was down 0.1% to R14.80/US$ by 7.30am in Johannesburg. The economy contracted an annualised 0.6% in the third quarter, and the latest power deficit has compounded the risk of a recession.

Ramaphosa’s decision to return to South Africa came after the Democratic Alliance appealed for him to cancel his engagements in Egypt to address the crisis at home.

“It is telling that at the height of what is not just an electricity crisis, but an economic risk and safety threat, the president decided to jet out of the country on an international sojourn to Egypt,” DA leader John Steenhuisen said in a statement. “Ramaphosa is greatly mistaken if he thinks he can run a country and manage this crisis via a cellphone.”

The department of mineral resources & energy said in a statement it’s 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 and Harmony Gold, which had shut down mines, said operations had resumed. Petra Diamonds said it had also resumed operations at reduced capacity. Palladium rose above $1 900 an ounce for the first time and platinum headed for the biggest daily gain since September.

In Cape Town, the nation’s biggest tourism hub that’s 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 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.  — Reported by Paul Vecchiatto and Liezel Hill, with assistance from Mike Cohen, Prinesha Naidoo, Colleen Goko, Felix Njini, Roxanne Henderson, Loni Prinsloo and Amogelang Mbatha, (c) 2019 Bloomberg LP