Photo by: Duane Daws
Steel and Engineering Industries Federation of Southern Africa (Seifsa) has urged government and State-owned power utility Eskom to bring an end to the current bout of load shedding, which, in the past three weeks, has cost the metals and engineering sector an estimated R6-billion in lost revenue.
Seifsa chief economist Henk Langenhoven in a statement highlighted that the metals and engineering sector’s total production for 2014 was estimated to be in the region of R320-billion, with value added to the economy estimated to be R84-billion.
It was further estimated that the sector produced a R26.5-billion turnover in November and added about R7-billion to the South African economy.
Without the constraints, taking these assumptions into account, Langenhoven said it was estimated that R6-billion in output and R1.5-billion in value add had been lost. This amounted to a 23% loss of production and value add for the economy.
However, the most serious potential loss was that of international markets owing to production uncertainties. Exports constituted 60% of production and imports had captured a similar share of the domestic market.
“Markets lost owing to nonperformance may never be regained as a perception has been created that these shortages will continue for years. The resumption of gross fixed investment in the sector and, therefore, faster growth was unlikely,” said Langenhoven.
Seifsa CEO Kaizer Nyatsumba said on Monday that it was “completely unacceptable” that a country with South Africa’s level of development found itself in the midst of a load shedding crisis “right in the middle of summer”.
He added that the frequent energy supply shortages and supply security uncertainty were damaging South Africa’s international reputation as an investment destination, and the power outages, which culminated in stage-three load shedding last week, had also caused further harm to the country’s already ailing economy, which would render South Africa globally uncompetitive.
Nyatsumba highlighted the vital importance of energy supply for a thriving business environment in general and in the metals and engineering sector in particular, for which energy costs accounted for an average 8% of total intermediary input costs.
It stood too reason, therefore, that without a reliable energy supply, the sector could not expand or, ultimately, exist.