The run-up: Eskom shocks the country with blackouts (or 'load shedding") State-owned electricity producer Eskom, which declared its fourth power emergency of the 2013/14 summer maintenance season on Thursday morning, began implementing loa shedding from 9:00, causing shops to shut, disrupting cellular networks and raising fresconcerns about the constraint being placed on South Africa's already poor growth outlook by the country's electricity shortages. Mining Weekly. 6 March 2014 In 2007 suddenly Eskom announced that, with electricity reserves running lower than 8% in some areas, they would need to implement a blackout schedule - euphemistically called "load shedding' - from 2008 onward to prevent crashing the entire national electricity grid. They also announced that, following years of underfunding by the government, they faced a huge longer-term generation capacity problem and would need to build several new power stations - but that it could take several years (and cost billions of rands). To 'solve' the problem in the interim. Eskom put pressure on mines. aluminium smelters and large factories to cut back on their electricity usage. To achieve the desired 10% reduction in electricity consumption, many had to cut back on production. Retail and other businesses suffered losses and many had to buy diesel generators to carry them through blackout periods. Planned - and often unplanned - maintenance on ageing power stations and other equipment contributed to a bad period for the economy with regard to a vital input. The disruptions had a very negative effect on business confidence and appear to have discouraged foreign direct investment in South Africa. The year 2008 alone is estimated to have cost the economy R50 billion in lost production. Moreover, to help fund its capital expenses. Eskom increased electricity tariffs significantly. Having had average annual price increases of just above 5% since 2000, from 2008 tariffs were increased by, on average, 27% per year for four years. After that it was restricted . 7 "cca (the official regulator) to 16% and then 8% per year - still above the rate of infants In 2012, Eskoin .we again warned that rolling blackouts may happen until February 2013; in early 252 load shedding occurred again. This general situation was expected to last until 20." when Kusile and Medupi, two coal power stations being built in Mpumalanga and Limpopo respectively, should both be on stream. (The fact that the construction of the power stations fell behind schedule during 2013 further increased business and consumer anxiety.) On a macroeconomic level, as shown in the diagrams in chapter 1, the period under discussion is characterised by upward pressure on the average price level since 2010 (i.e. several increases in the inflation rate) plus a decline in the GDP growth rate since 2011. While many factors have probably contributed to this course of events - e.g. increases in the dollar price of oil since 2010 coupled with a decline in the real effective exchange rate of the rand since early 2011 - the Eskom problems appear to have had a noticeable impact on both the GDP rate of growth and the rate of inflation. At the very least Eskom is a substantial part of the explanation of events