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Looming power blackouts threaten South Africa’s economy

WINDMILLSPRETORIA, South Africa – South Africa’s capacity to generate electricity is shrinking due to ageing power plants, latest statistics show, and the continent’s most developed economy could face rolling blackouts for years to come.

New data released by Statistics South Africa highlight how the beleaguered state power utility Eskom, which generates around 95 percent of the country’s electricity, is unable to meet demand.

Electricity production dropped 1.4 percent from January through November last year compared with the same period in 2013.

In November, Eskom had to introduce power cuts across the country to prevent a collapse of the grid after a coal storage silo collapsed.

The outages escalated in December when swathes of the economic hub of Johannesburg were repeatedly plunged into darkness.

Eskom, which relies on its ageing coal stations for supply, has warned of a high risk of more “load shedding” until March at least.

But analysts predict that the blackouts could continue for two more years until new power plants come on stream.

That would be bad news for South Africa as one of the BRICS group of emerging economies considered to have huge potential, along with Brazil, Russia, India and China.

Last year’s outages cost companies millions of dollars in lost production and business and battered South Africa’s already-struggling economy, which was expected to grow by 1.4 percent in 2014.

Growth is forecast to rise to 2.5 percent this year, but that is still well below South Africa’s potential, and the impact of power cuts will be more widespread this year.

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“This year it’s a different situation. It’s negatively affecting the retail sector, it’s much more across the board and it’s much more immediate,” said Dennis Dykes, chief economist at Nedbank.

“Unfortunately it certainly has the potential of hurting growth, anything between half a percent to one percent of GDP,” said Dykes.

“It is a real constraint on the economy.”

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