Black days ahead for ICT?

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 08 Jan 2008

Economic activity resumes this week and with it increased power consumption - and a renewed cycle of rolling blackouts as demand outstrips supply.

A reliable electricity supply is fundamental to the functioning of the public and private sector. But, until 2013 this supply cannot be taken for granted, power utility Eskom says.

As a result, power outages stand to be a continual inhibitor to successful business operations this year. This morning, Eskom's Web site warned there is a high risk of load shedding throughout the day.

Cost of supply

Companies will also shortly pay more for the electricity they do use. The National Energy Regulator last year approved a 14.1% increase to fund a R150 billion programme to build new coal-fired power stations, return to service a number still in mothballs, and upgrade the power distribution grid.

President Thabo Mbeki last month admitted the power shortage was the fault of Cabinet rather than Eskom. He said government should have heeded Eskom pleas "several years ago" to invest more in electricity generation to keep up with the country's economic growth.

"When Eskom said to the government: 'We think we must invest more in terms of electricity generation', we said 'no, but all you will be doing is just to build excess capacity'," Mbeki said in comments broadcast on SABC radio. "We said 'not now, later.' We were wrong. Eskom was right. We were wrong."

T-Sec chief economist Mike Schussler says the outages will make running a business more difficult, particularly knowledge-based companies. "It will affect GDP [Gross Domestic Product], growth and job creation," he says.

"We definitely won't reach our 6% growth rate target." The higher power price, along with the damage caused by outages, higher inflation and interest rates, and escalating fuel as well as food prices have all combined to rule this out, he adds.

Measuring cost

Neither he, nor Econometrix economist Tony Twine could put a figure to the losses the economy has suffered due to outages since October last year, nor what it will cost this year and next.

"No-one has been able to measure the cost," says Twine. "It is a metrics problem. Where do you start to measure?" He says the main loss to business is time and productivity.

Both say the outages also add a hassle factor, measurable in "higher blood pressure and irritation", particularly if Eskom does not stick to published load shedding schedules, which in principle should allow businesses to plan around power interruptions.

Cost to business

Last month, George Steyn, MD of discount clothing retailer Pep, told newspaper Business Report electrical failures and load shedding had affected a quarter to a third of the chain's stores in the northern part of South Africa, simultaneously at times. The stores cannot trade during power outages, he explained.

Clicks MD Mike Harvey told Business Day load shedding was a problem for all retailers. "We have to close our stores while the power is down and we are tracking the impact on our sales very closely. December is by far our highest turnover month." Harvey says shoppers leave malls when power is cut, which affects trading for the rest of the day.

Edcon spokeswoman Tessa Christelis told the same paper power cuts have done more to curb growth than the Reserve Bank through interest rate increases. She says outages in November and December had pushed sales volumes down. Edcon makes a quarter of its annual sales in those two months. Christelis says on days when there were power cuts, sales were 5% lower than normal.

World Wide Worx MD Arthur Goldstuck says Eskom is fortunate not to have faced a class action law suit to date. He adds such litigation may help determine the cost of load shedding.

Coping with the darkness

Goldstuck says relocating will not help businesses cope with the blackouts. "There is no clarity on when and where blackouts will strike. Poor planning means nowhere is safe," he says. "Rolling power outages don't take heed of needs or priorities.

"So, it is not a question of location but of UPS [uninterruptible power supply], back-up and recovery."

He adds that small businesses are more vulnerable to the outages as they lack the distributed architecture of larger companies, both in location and in IT backbone. "Large businesses can spread work across networks; both physically - meaning other branches - and IT infrastructures. Small companies do not have that ability."

Goldstuck points out that Bedfordview's small businesses were "totally out of business" for a week last year when the suburb's power grid was down.