Lowest ESKOM output since 2008

2016-08-23 12:07

This article was originally posted onto SharenetVIEWS

No more load shedding: Good news or Bad? There has been a lot of press about how great ESKOM has been doing with their maintenance and build program, and how we haven’t had load-shedding for a year and are likely to have seen the back of load shedding altogether. Incredibly, just before the local elections, President Zuma announced we may even be exporting surplus electricity soon! You must be wondering how the heck we go from a dire shortage with nationwide rolling blackouts to trying to figure out where we can export surplus electricity to in such a short space of time.

There is no doubt the current ESKOM management are doing much better at the maintenance and build program than those years leading up to load shedding. But to think that this is the whole reason we are out of the way of any load shedding is a big mistake. A very large part of the reason we are not seeing load shedding is that heavy industry has scaled back (often at the request of ESKOM) and the economy is now in its 31st month of a business cycle recession declared by the SA Reserve Bank a few months ago.

Across the world, total electricity production has been used as a good proxy indicator for economic strength. And South Africa is no exception. A drop off in electricity production neatly warned of the 2008 Great Recession and the one before that. Now look at the total monthly electricity production including all the independent power producers and green energy projects, in the chart below:

On a monthly basis, June 2016 is the 2nd lowest print in 7 years, whilst on a quarterly basis, the 2H2016 print is the lowest since 2008.

In the rest of this article posted on SharenetVIEWS, we discuss two causes of this contraction in electricity output and  show how amazingly tight electricity production is correlated to SA GDP. We then show how the 2nd quarter 2016  electricity output print (lowest since 2008) actual bodes badly for the upcoming 2nd quarter GDP print.

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