A national crisis

2008-01-22 00:00

The joke goes “What did Zimbabwe use before candles? Electricity”. How far are we from this situation? Recently a local politician stated that due to the fact that businesses were being made aware of power outages in advance, the impact was in fact minimal. This could not be further from the truth. Only politicians can display such naïvety or ignorance of the realities facing our country. We are indeed facing dark times, if you will excuse the unintended pun.

We need to consider the impact on the different key sectors in order to assess the full impact.

The manufacturing sector in particular is being very hard hit. Firstly, continuous-process production plants cannot sustain continuous breaks in power, simply because their equipment and processes are of such a nature that serious if not permanent damage can occur in the event of an unplanned outage. And the truth is that despite the attempts to stick to a schedule of outages, it does not always run to schedule. These outages in continuous-process factories can also lead to significant losses of raw materials and partially processed goods.

Then there is the question of lost production time. Losing two hours a day every second day can result in a loss of almost one full day’s production each week. This means that to maintain output, companies are now having to pay staff to do nothing during every power break and then pay overtime to catch up the production outside normal working hours.

One factory in Pietermaritzburg was quoted R2 million for a sufficiently large generator to sustain them during an outage. The ongoing maintenance and running costs are not included in this amount, nor is an uninterruptible power supply which would possibly run to R10 million for this size.

Bear in mind that our fragile manufacturing sector is responsible for a large part of our exports, which will now decline, simply because the volume required cannot be made or because the additional costs being incurred will force costs upwards and reduce their competitiveness. We can look forward to an increase in manufacturing businesses being liquidated as a consequence.

Banks in the financial sector simply have to close their doors, as without power they have no computers and without computers they cannot transact. Estimate the cost to the banking sector if they had to provide back-up power for in excess of 3 000 branches.

Retailers are unable to transact as their computers also become useless without power. Food quality decreases without fridges or spoils completely. Shoplifting technology does not work without electricity, so shops have to close. Shops dependent on tourist traffic are being particularly hard hit, as they do not get a second shot at the business they lose.

Tourism without electricity? It is a short list of tourists wanting a really crummy holiday at high prices. A night or two in a tent in the bush is fine, but not four weeks. Bye bye tourist income.

Traffic gridlock due to traffic lights being out of use leads to a further reduction in performance and efficiencies, as staff members are delayed in the execution of their duties or, as is often the case, are unable to execute their duties, leading to the task having to be done twice before it can be completed.

The losses incurred in the factories and retail outlets are possibly insured, but that in turn decreases insurance sector profits, which in turn reduces their investment in the country, as they now have that much less to invest. The insurance sector plays an important role in the country’s investment market.

When the power is out businesses have no computers, no faxes and no telephones. What is this costing business, even, and maybe in particular, small business, when you lose a day’s trading every week, or in other words 20% of your trading time? This has to impact on sales, which will in turn impact on profitability and quite likely retrenchments. The cost of generators and uninterruptible power supplies is also impacting on profitability and the ability of these businesses to grow. The cumulative effect is an irretrievable loss of gross domestic product and GDP growth.

The truth of the matter is that this power issue is hurting business really badly. It is definitely hurting the country as a whole. It will result in the further reduction of our competitiveness in the global competitiveness ratings, which will lead to a reduction in our credit rating as a country and quite likely lead to a reduction in foreign direct investment into the country. Inflation will rise with increased costs, which in turn will lead to higher interest rates and a greater financial burden for Joe Citizen.

Unemployment too can be expected to rise and, with that, crime. The Eskom CEO was recently quoted as saying South Africa should not be proceeding with the large developments such as Coega. The man is a dangerous lunatic or a complete fool, and either way should be removed from office.

There is most definitely a need for an independent investigation into this crisis. Not another government-funded job for another government buddy, who never achieves anything and who would not recognise the truth if it bit him or her. International consultants need to be called in now to get to the bottom of things before the country does.

This is by far the most important issue in the country right now and is also the biggest threat to democracy our country has faced since 1994. Our government should focus less on power struggles and more seriously on power provision.

• Rob Smorfitt is a businessman and the former president of the Pietermaritzburg Chamber of Commerce and Industry.

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