South African homes, offices and businesses have endured a week of daily power cuts, designed to prevent a total collapse of the overstretched electricity grid.

protesters over light shedding in Soweto.jpg

The use of scheduled blackouts, or load shedding, is not new in the country – but the latest round has been the most disruptive yet, sparking a public outcry. As the state-owned power utility, Eskom, battles to meet demand, it has warned that it could run out of money by April, defaulting on its vast debt.

Eskom is one of the biggest power utilities in the world, while South Africa is the most-industrialised country in Africa.

The crisis at the utility poses a huge threat to the economy and to the political survival of President Cyril Ramaphosa, who faces an election in May.

The light shedding is so bad that traffic lights in cape town is also affected.

traffic light out of action in cape town.jpg

The load shedding further cuts into Eskom’s revenues and also hurts the economy at large, lowering industrial output and business productivity. But the cost of temporary power outages is nothing compared to the potential damage to the economy if Eskom were to go bust.

The firm has recently been described by government officials as “technically insolvent” and in a “death spiral”. It owes nearly 420bn rand (£23bn; $30bn) – an enormous sum on which it can barely even afford the interest payments.

More than half of Eskom’s debt is guaranteed by the government, accounting for 15% of the national debt. International banks have described Eskom as the single biggest threat to South Africa’s economy.

To save Eskom, the government could be asked to inject more money into the utility, and to assume responsibility for yet more of its debt.

But it is not clear where the government would find the resources to do so. The economy is already faltering and any bailout of Eskom could harm South Africa’s credit rating, making matters worse.


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