South Africa’s Eskom carries out biggest power cuts in years

The logo of state power utility Eskom is seen outside Cape Town’s Koeberg nuclear power plant in this picture taken March 20, 2016. REUTERS/Mike Hutchings

South Africa’s Eskom implemented the most severe power cuts in years on Monday after seven generating units unexpectedly went offline, underscoring the challenge President Cyril Ramaphosa faces to fix the struggling state-owned utility.

Ramaphosa is trying to reform cash-strapped Eskom, which supplies more than 90 percent of the power in Africa’s most industrialised economy but is drowning in 419 billion rand ($30 billion) of debt, to lift the economy before an election in May.

But he has been hampered by fiscal constraints, as well as a sharp deterioration in Eskom’s power plant performance after years of mismanagement during which critical maintenance work was delayed.

The rand fell to its weakest in almost three weeks, and Eskom’s dollar-denominated 2028 bond suffered its steepest daily fall in more than two months, as investors fretted about the economic impact of the power cuts.

Public Enterprises Minister Pravin Gordhan met Eskom executives and the firm’s board of directors to discuss a way out of the crisis. They decided to conduct a full audit of the country’s power system to identify weak points and avoid further crises, the board said in a statement.

Four of the seven units that unexpectedly went offline were back in service by Monday evening, while the remaining three would be back by Tuesday morning, the statement added.

Ramaphosa, who announced a plan last week to split Eskom into three separate entities in an effort to make it more efficient, said on Twitter the power cuts had come as a shock and were “most worrying”.

Ramaphosa’s plan to split Eskom faces opposition from powerful labour unions and within his ruling African National Congress party, while some analysts have said a bolder approach was needed.

Ratings agency Moody’s said on Monday an “unbundling” of Eskom into different units for generation, transmission and distribution would pave the way for greater transparency but do little to solve the firm’s financial difficulties.

“While this is a bold step, it probably won’t be enough. Splitting it in three doesn’t fix the issue that Eskom is in a very dire financial situation,” said Trieu Pham, an emerging market debt strategist at Dutch bank ING.

Eskom was also forced to cut power for a sustained period in late November and early December, also due to a shortage of generating capacity because of unplanned outages.