South Africa hit by record blackouts

South Africa’s state power company intensified rolling blackouts to a record, signalling a deepening crisis at the debt-ridden utility and raising the risk of a second recession in as many years.

Eskom said on Monday it will move to stage-6 load shedding from 6pm, meaning it will cut 6GW from the national grid, after a technical problem at the giant new Medupi power station curbed supply. That’s the biggest cut yet. The utility downgraded the status to stage 4 as of 10pm.

The utility is curbing power for a fifth straight day as it struggles with breakdowns at plants and heavy rains that have soaked coal used as fuel. The blackouts have a debilitating effect on the economy by curtailing mining and factory output and causing crippling traffic delays.

“It does mean that the economy is heading for a recession,” Iraj Abedian, CEO of Pan-African Investments and Research Services, said by phone. “There’s no way that hot on the heels of the previous quarter’s negative growth in GDP with this type of humongous and material disruption to the continuity of business that the economy can register positive growth.”

South Africa’s statistics office announced last week that GDP shrank an annualised 0.6% in the three months to September. Power cuts also dented the economy in the first quarter, when it contracted the most in a decade, led by a drop in manufacturing, mining and agriculture output

Eskom’s announcement marked the end of a torrid day on Twitter for South African President Cyril Ramaphosa. His weekly letter to the nation highlighting how Medupi is a fitting symbol of the importance of state-owned companies was derided on the social media site.

Ramaphosa responds

At 10pm, he issued a statement commiserating with his countrymen. “The ongoing load shedding is devastating for the country. It is causing our economy great harm and disrupting the lives of citizens,” he said. “The anger and frustration that this load shedding has caused is understandable.”

Municipalities were also caught off guard, with Johannesburg electricity distributor City Power saying it has no load shedding schedule for stage 6.

Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.

Load-shedding at stage 6 is “no cause for alarm as the system is being effectively controlled”, Eskom said in a statement. “Eskom’s emergency response command centre and technical teams will be working through the night to restore units as soon as possible.”  — Reported by Prinesha Naidoo and Rene Vollgraaff, with assistance from Felix Njini, Antony Sguazzin and Paul Vecchiatto, (c) 2019 Bloomberg LP