Investors seeking projects in South Africa need to take account of power shortages that may result in more planned outages, Trade Minister Rob Davies said.
“Investors have recognized that there is an energy challenge,” Davies said in an interview on Tuesday in Davos, Switzerland before the start of the World Economic Forum. “That is something that they need to factor in to their factors of risk and reward.”
Eskom Holdings SOC Ltd., the utility that generates 95 percent of South Africa’s power, implemented rolling blackouts across cities on Jan. 9 and warned of almost daily managed outages until April as it struggles to meet demand. Bank of America Merrill Lynch estimates that three months of continuous power cuts could shave as much as 1 percentage point off the economic growth rate.
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The government is seeking short-term measures to help ease the shortages and is reviewing Eskom’s maintenance plan to ensure there’s no unplanned outages, Davies said.
New power generation capacity has been delayed as construction of two new coal-fired power plants lags about two years behind schedule. Eskom is struggling to fill a 225 billion-rand ($19 billion) cash-flow gap to help boost electricity supply.
Manufacturers are “relatively comfortable” with the rand after it weakened 6.5 percent against the dollar in the past year, Davies said. “It is definitely more competitive than it was before,” he said. “When it was overvalued, we said that was a major competitive disadvantage to South African manufacturers.”
