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SA to sign fuel deals to tackle power crisis

SA to sign fuel deals to tackle power crisis

South Africa will increase diesel and gas imports and sign a private sector coal-fired power plant deal as it seeks to halt chronic electricity shortages, the cabinet said recently.

The rand fell to its weakest level against the dollar in six years this week as a current account deficit and power shortages underlined South Africa's weak economic growth prospects, raising fears of credit downgrades. A private sector-led coal-fired power plant programme will be launched by January 2015, which should add 2,500 megawatts of generation capacity, Minister in the Presidency Jeff Radebe told reporters.

The government also will announce details of 17 renewable energy projects, aiming at supplying an additional 1,000 MW, industry sources said. Furthermore, Radebe said it would increase gas and diesel imports to supply under-fuelled power plants, which could add another 500MW to 2,500MW. South Africa this month has suffered its worst power shortages since 2008 due to creaking infrastructure, power plant failures and emergency maintenance.

State utility Eskom warned that if it did not continue to implement rolling blackouts, the entire grid could collapse as it lost up to a third of its 42,000MW capacity.

"The cabinet remains concerned over the disruptive effect the recent power outages are having on the daily lives of South Africans and its impact on households and businesses across the country," Radebe said.

The gas imports are expected to come mostly through an existing pipeline from neighbouring Mozambique, although a liquefied natural gas (LNG) terminal also has been discussed.

"We are facing a massive crisis to the South African economy that is costing us hundreds of billions of rands in lost production," said Dawie Roodt, chief economist at Efficient Group.

"Clearly, what we have done up to now is not working, and I don't know if we are doing enough to turn the ship around."

Deputy President Cyril Ramaphosa will oversee the planned turnaround at Eskom and similar programmes for struggling state-owned South African Airways and the strike-hit Post Office. Eskom, which supplies almost all the country's electricity, says it will have a funding shortfall of R225bn ($19.6bn) over the next four years.

Government said in October it would inject R20bn ($1.8bn) into Eskom and it could also convert its existing R60bn subordinated loan to state-owned equity.

But the sum is due to come from the sale of "non-strategic assets", privatisation that is sure to come under attack from President Jacob Zuma's far-left opponents and powerful trade unions.

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