Power Struggle: Electricity Outages Hit South Africa Months Before Election The state-owned power utility has become the president’s biggest political headache ahead of the May vote By Gabriele Steinhauser and Simthandile Ntobela
https://www.wsj.com/articles/power-struggle-electricity-outages-hit-south-africa-months-before-election-11550152801
The biggest test to the South African president’s power right now: Can he keep the power on?
Africa’s most-developed economy this week is experiencing its worst blackouts in years, with households, businesses and key infrastructure left without electricity for up to nine hours a day. The power cuts have hobbled the country’s mining sector, paralyzed traffic behind disabled stop lights and forced people to cook dinner outside on paraffin stoves—less than three months ahead of national elections that will determine whether President Cyril Ramaphosa, who ousted his scandal-battered predecessor last year, can win a full term.
At the center of the shortages is South Africa’s state-owned power utility Eskom, which supplies some 90% of the country’s electricity, but has been rattled by years of mismanagement and alleged corruption involving senior management. On Wednesday, the company warned that it was technically insolvent and would go bankrupt by April unless it gets a multibillion-rand government bailout.
On the WaneSouth Africa’s state-owned power utility,Eskom, has aging power plants and suffersfrom technical failures and has struggled touse much of its capacity.
Saddled with some 420 billion rand (around $30 billion) in debt—much of it government guaranteed—Eskom has become Mr. Ramaphosa’s biggest political headache. The company’s failure to generate sufficient electricity is eroding already anemic economic growth, while another bailout would add to the government’s rising debt load.
Moody’s Investors Service, the last of the big three ratings firms that considers South Africa’s bonds investment grade, warned this week that pumping more public money into the utility without a credible turnaround plan could trigger a downgrade to “junk.”
“Eskom’s current situation is the single biggest risk to South Africa’s economy,” Mike Fraser, chief operating officer of Australian miner South32, said at a Cape Town mining conference last week. The firm owns coal and manganese mines as well as aluminum smelters in South Africa.
Yet, the president’s plan to fix Eskom is putting him on a collision course with powerful factions in his own African National Congress. In his State of the Nation address last week, Mr. Ramaphosa announced Eskom would be split into three entities, separating electricity generation from transmission and distribution—a move that is set to lead to large-scale job losses. CONTINUE AT SITE
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