Advice and Opinion

Load shedding estimated to cost economy R75 million per hour


The sentiment that load shedding has been crippling small businesses has been unanimously shared across the sector. Most businesses are unable to afford the costs associated with investing in a generator.

Without a doubt, the cost to the economy is real and it is certain to cost billions of Rands. In addition, the potential for businesses shedding jobs to keep trading is the intrinsic unquantifiable cost which we need to mitigate where possible” comments Alderman Vos, the City of Cape Town’s Mayoral Committee Member for Economic Opportunities and Asset Management.

Cape Town contributes more than 70% of the Western Cape’s Gross Domestic Product and in turn, the province contributes around 14% to the national Gross Domestic Product. The economic burden of load shedding will be felt by Cape Town as well as other economic hubs in the country, especially for industries such as the manufacturing sector who are reliable on electricity as they are located in large urban areas.

Economist Dr Azar Jammine has said that the direct impact of load shedding on the South African economy was between 0.1% and 0.2% of the Gross Domestic Product.

The City of Cape Town’s green economy partner, GreenCape conservatively estimates that over the past two weeks (and counting), load shedding cost the economy R75 million per hour.

According to the March 2018 Western Cape Energy Consumption and CO2 Emissions Database, energy consumption by sector for the Western Cape in 2015/2016, residential was the biggest consumer of electricity at 42%, industry at 31%, commercial at 17% and agriculture at 6%.

One small positive is that the services sector is the biggest contributor to Cape Town’s (and the province’s) Gross Domestic Product and this sector is less reliant on energy for economic activity impact on productivity, among others.

Alderman Vos highlighted the resilience of Cape Town’s residents: “The longer-term effect is far more worrying for me. We need to be deeply concerned about investment decisions that are potentially being deterred by load shedding. The uncertainty of supply places small businesses and manufacturers in the supply chain at risk.”

The City is aware that it needs to diversify its supply of electricity. One way to do this is by purchasing electricity directly from Independent Power Producers. At present, national government policy allows Independent Power Producers to only sell electricity to Eskom, which is controlled through the issuing of generation licences.  The City is challenging national government in the courts, on an urgent basis for the right to purchase renewable energy directly from Independent Power Producers.

“We encourage young people to become entrepreneurs and to start their own businesses, but Eskom’s load shedding raises the big question of how their businesses will survive without electricity, which of course impacts negatively on their household income” he concludes.