With resurgent warnings that load-shedding could potentially increase as high as Stage 8 and the possibility of fuel rationing in the domestic market, the Institute for Risk Management South Africa’s (Irmsa’s) ‘Risk Report’ for 2022 states that the South African economy is in for serious energy risks.

Eskom COO Jan Oberholzer recently confirmed that the State-owned power utility was using nine-million litres of diesel a day at its open-cycle gas turbines in order to avoid load-shedding or to keep load-shedding at lower levels while its coal fleet is struggling to meet supply.

This has come while Russia’s invasion of Ukraine and subsequent sanctions have left global diesel reserves in a precarious state.

Since the grid is heavily reliant on diesel reserves, Eskom may be forced to implement Stage 8 load-shedding in a worst-case scenario.

Additionally, government might introduce a price cap and limit on the amount of fuel sold to motorists to mitigate the impact of rising oil prices.

As it stands, load-shedding already causes lost economic output of about R700-million per stage per day. Load-shedding is estimated to have contributed to more than one-million job opportunities lost.

South Africa is on its lowest energy availability ever recorded, which will get worse this year as the Koeberg nuclear power station is operating only one unit at a time, while the other unit is out for maintenance.

The Irmsa risk report warns that this energy-threat situation holds risks of lower productivity and plant availability, slow progress on unbundling, prohibitive cost of alternatives and poor capacity, which could result in a drastic decline in economic growth, service delivery and social cohesion, across the country.

In response to this scenario, Irmsa proposes a series of risk treatment options and opportunities, including the fast-tracking of unbundling Eskom into three separate units, accelerating the 100 MW self-generation initiatives and having country-level plans for modern technologies that have the potential to be localised and spur economic growth through projects – such as green hydrogen and storage.

The institute further recommends that other, non-energy-specific options should include a concerted push for policy certainty to encourage greater foreign investment, greater cooperation between the private and public sectors to allow the economy to develop and greater privatisation of State-owned entities (SOEs).

The average profitability of SOEs, measured by return on equity, is -7.9%, owing to weak revenue growth, high costs and debt-service costs.

The report reaffirms Irmsa’s conviction that proactive risk management is a key driver of the country’s ability to create a future in which all citizens can prosper.

“There is no silver bullet here, progress can only be made with a sustained and capable focus that looks at the issues through a South African lens. We need innovative approaches that recognise the lessons learnt elsewhere, but acknowledge our unique national circumstances,” Irmsa states.