Introduction

since the beginning of load shedding one decade ago, the level of life of South Africans has never been
the same again. Both industries and households have accepted as new normal living without
electricity for several hours or days. This loadshedding has negatively affected families, firms, and
the entire economy of the country. Some firms have waisted worthful working hours instead of
producing goods and services due to lack of electricity. Families have experienced the pain of going
without electricity and seeing their electrical appliances damaged because of the loadshedding. The
economy has been the hardest hit due to loadshedding as the unemployment increased and the
government revenue declined substantially. South Africa is facing an energy crisis with further power
cuts expected in 2023, which is projected to constrain GDP growth. The South African economy has
been adversely affected by the Covid 19 pandemic and its recovery trajectory is now stifled by
persistent load shedding. It is evident that this energy crisis will be something that will be in existence
for some time in the future and it is likely to get worse. In the year 2021, there were 75 days of load
shedding and in 2022 this increased to 208 days.

Some firms have lost huge amount of money because of the failure to produce without electricity.
In fact, the duration of the load-shedding implies that more diesel through generators should be
consumed to remain operational. The Diesel Fuel Tax Refund system will be impacted by the increased
reliance on diesel by industries such as agriculture, forestry, fisheries, and mining. Because
loadshedding affects all industries, government could think about expanding the diesel fuel tax
refund structure by incorporating strategic industries that consume the most diesel to reduce the
consequences of the loadshedding. Moreover, the energy crisis has created new opportunities
because the government is planning to invest in the usage of renewable energy. In view to
address the challenge of loadshedding, a wide range of reforms and policy measures were
respectively announced by the President and Minister of Finance in the State of the Nation Address
and Budget Speech 2023. Amongst others, this include the tax proposal aimed at enabling the
growth of the renewable energy industry wherein households who are willing to use solar panels will be
eligible to apply for rebate of 25% against the initial price of the panels, amounting to a maximum of
R15,000 from 1st March 2023. While big firms are shifting towards self-generation of energy, this will
have affirmative spin-offs for South Africa Revenue Service (SARS) through possible increased imports.
Investment in renewable energy by businesses and households will contribute to increased rebate
claims and thus result in refunds Although South Africa is not amongst the world leaders of
renewable energy capacity, it is the leader in renewable energy mix capacity in the African continent
followed by Egypt and Ethiopia. The country is a leader especially in both Solar and Wind energy and the
third largest in Hydropower within the continent. The top 10 countries using mixed renewable energy in
the world in terms of capacity are China, USA, Brazil, India, Germany, Japan, Canada, France, Italy,
and Russia. These countries have made considerable improvement in converting to renewable
energy as part of meeting various capacity targets and addressing concerns over air pollution. The
purpose of this paper is to provide an experimental input to the body of knowledge on the impact of
loadshedding in South Africa as well as the state of South Africa’s electricity industry and tax
analysis of the market participants. In this paper, a Computable General Equilibrium (CGE) model is
considered to analyse the impact of loadshedding on the South African economy. The model is a
static CGE model applied to South Africa, using 2015 as the base year. Section 2 provides the current
state of the loadshedding. Section 3 introduces the literature review. Section 4 portrays the
methodology while Section 5 provides the simulation results. Last Section concludes this study. 2.
Literature review The effects of loadshedding have been severe in the livelihood of South Africans not
only physically but also medically as well. For instance, there are great concerns in the hospital industry
which relies heavily on cold storage as prolonged periods of loadshedding are jeopardising the
viability of the industry. Patients have been traumatised by the cut of power and this has

. Even though South Africa has the highest rate of crime, prolonged load shedding has worsened the
crime rate, thus causing people to live in constant fear. The electricity sector plays an important role of
input into other sectors of the economy. In fact, electrical power constitutes the basis of the
digital economy which is growing with high speed and the main supplier of energy for the improvement
of citizen’s lives. In this respect, the citizen’s reliance on electricity as basic resource is imperative as
without it, they are sternly disadvantaged (The question inherent to the measurement of the value
that is lost to the economy because of the loadshedding is not a new theory in the academic literature.
In fact, the guarantee of electricity supply is a priority of energy policy across numerous countries
worldwide. Concerning the energy policy for the European Union, it must be noted that the future of the
energy sector depended mostly on the three important pillars that include sustainability, efficiency, and
security of energy supplies. Winzer points out that the crucial meaning of energy security in this
policy is not properly described while Loschel insists that the theory of security of energy supply shall
be redefined accordingly. Moreover, other researchers such as Checchi, Behrens, & Egenhofer
(2009) pointed out that there is no common interpretation in the security of energy supply. The
main reason could be that this expression is applied in various contexts across various fields. In 2007,
it was announced that there will be shortage of electricity in the following year 2008 if precautions are
not taken to generate more electricity. Consequently, the government turned a blind eye on the
warning as no investment in electricity infrastructure was performed. Meantime, the price hike in
electricity was repeatedly implemented as a mean to finance the investment which had a negative
impact on the economy that is extremely energy dependent. Besides, the investment was non-
negotiable condition to counter the negative effects of imminent loadshedding in the near future
Checchi, Behrens, & Egenhoferargue that no constructive measures were taken by the government
although several studies including the White Paper were done to warns the government concerning the
wearing out of the country’s electricity infrastructure and poor management capacity in the
electricity industry . The worst institutional weaknesses were observed in the leadership of the major
electricity supplier named ESKOM when the executive management eroded tax money with corruptions.
In 2007, almost all the studies recommended that the government improves the supply capacity of the
electricity to be able to meet the domestic demand (Akinbani, Oke & Bodunrin, 2021). ESKOM’s
prolonged stage 6 loadshedding has already caused significant damage to the country’s economy, with
over R4 billion wiped from the GDP for each day it continues. If it were not for ESKOM’s failings, the
country’s economy could be between 8% and 10% larger. But aside from the damage done to the
economy in general, specific sectors are now sounding alarms over the harm caused by ESKOM’s load
shedding (CSIR, 2019). The Bureau of Economic Research (2022) stated that the current round of
loadshedding is likely to have a similar impact on the nation’s GDP in the third quarter. The intensity of
the current power cuts threatens the GDP recovery from the 0.7% quarter-on-quarter contraction
experienced in 2022 quarter 2.

It also serves as another reminder of the urgency to fast-track increased private sector power
generation, including securing funding for this. Linares & Rey (2013) pointed out that various kind of
impacts are linked to the costs of a power interruption. In fact, the cost is considered as loss in
electricity consumption caused by the power interruption. The persistent power cuts are bound to
cause anxiety and depression for many people and can be also fatal. South Africa has faced power cuts
at unprecedented levels that have affected the everyday life for ordinary South Africans. Sanghvi (1991)
argues that the type of costs depends on the gravity of the loadshedding based on the time and duration
of outage, consequence, and notice for power cut. The real cost is measured through the determination
of the related individual who suffers the consequences of the power cut. Table 1. Various impacts of
loadshedding Source: Linares & Rey, 2013 The measurement of the economic cost triggered by the
loadshedding is challenging due to the indirect impacts of power interruptions. Nonetheless, two
factors such as the postponement of the cost of income and the commercial cost of loss of market
share should be taken into consideration. For instance, the research conducted by the Assistant
Secretary for Energy Technology (1978) for the purpose of measuring the indirect effect of the
economic costs of the 1977 New York City blackout indicated that burning and looting reported for
more than one-half of the entire economic costs were linked directly to power cut. Investors are
doubtful about investing in South Africa due to current continual loadshedding. Albeit investors
turn blind eyes on the electricity crisis and decide to invest their funds in South Africa, the
excessive risks coupled with the investment will make it very costly. The country’s economy is facing an
unprecedented scenario with load shedding not only impacting food security and communication
networks, but business sectors and industries at large. Stats SA (2022) reported that the country’s
gross domestic product decreased by 0.7% in the second quarter of 2022 – much of this decline was
attributed to rolling blackouts which hobbled economic output. Loadshedding undoubtably impacts the
economy and thus directly affects revenue collections. For instance, in the mining industry revenue
losses will impact government’s ability to earn revenue from taxes and royalties. Some industries are
losing billions of rands in revenue due to the inability to operate without electricity. The more frequent
loadshedding occurs and the longer it lasts, the more diesel through generators must be consumed
to remain operational. In this case, the Diesel Fuel Tax Refund system will be impacted by the increased
reliance on diesel by industries such as agriculture, forestry, fisheries, and mining. Because load
shedding affects all industries, government should consider broadening the diesel fuel tax refund
system to include critical industries that currently use higher than usual amount of diesel to
counter the effects of the load-shedding. The energy crisis also Direct economic impact Indirect
economic impact Social impactLoss of production The cost of income being postponed Uncomfortable
temperatureRestart costs The financial cost of loss of market share Loss of leisure timeEquipment
damage Risk to health and safetyRaw material spoilage

82 provides new opportunities as government intends to bolster the use of renewable energy. 3.
Loadshedding overview South Africa seems to experience for the first time ever an unending
loadshedding encounters. This recurrent phenomenon will possibly continue due to the deterioration of
the country’s electricity generation infrastructure which requires replacement (Findt, Scott, &
Lindfeld, 2014). CSIR (2020) indicates that loadshedding negatively affected the economy by a
significant loss amounted approximately to R120 billion just for the year 2019. This is due to the
blackouts that continued for a total of 1,352 GWh – or 530 hours in 2019. Nonetheless, when
compounding the effects of loadshedding dating back from 2007 to 2022, the overall economic effect
over the period is about R338 billion. In fact, the total economic impact of loadshedding in South Africa
should be more than R338 billion over the past one-decade. As indicated earlier, South Africa is
confronted with the persistent and worsening load-shedding which has become a new normal with
daily power cuts that are affecting all sectors of the economy and society. These persistent electricity
cuts resulted in 2022 being South Africa’s most unpleasant year for load-shedding with 208 days of
power cuts compared to 75 days in 2021 and has continued into 2023 with each day of the new year
having load-shedding with higher stages up to stage 6. It is expected that this situation would remain for
up to 24 months as announced by ESKOM (ESKOM, 2023). The average Energy Availability Factor (EAF)
slumped to an average of around 58% in 2022, down from 62% in 2021 and 65% in 2020. It remains well
below the utility’s target of 75%. It has averaged 52% thus far and dropped to below 50% for the first
time in the first week of January 2023 (Standard Bank, 2023). The power cuts not only disrupt the
functioning of the economy and households but also carry with its price effects on the cost of running
business and cost of living and thus negatively impact on the growth trajectory of the economy which
was recently eroded by the spread of the COVID-19 pandemic. The Monetary Policy Committee (MPC)
stated in its latest statement that due to load shedding, the GDP growth is forecasted at 0.3% for 2023.
Given the severity of load-shedding, the Bank projects that it will reduce growth by approximately 2
percentage points in 2023, as opposed to the earlier prediction of 0.6 percentage points (SARB, 2023).
In an attempt to address the challenge of load shedding a wide range of reforms and policy measures
were respectively announced by the President and Minister of Finance in the State of the Nation
Address and Budget Speech 2023. These measures included amongst others the declaration of the State
of Disaster, appointment of the Minister of electricity, debt relief of R245 billion for Eskom, tax
proposals that are aimed at enabling the growth of the renewable energy industry wherein
households who set up rooftop solar panels will be qualified to apply for a rebate of 25% of the
capital spending of the panels, up to a highest amount of R15,000 from 1st March 2023. The
renewable tax breaks for businesses include a reduction of their taxable income by 125% of the
cost of a capital spending in renewable energies, without limits on the generation power. The latest
tax proposals indicate that, albeit not radical, the government is committed to promote the use of
renewable source of energy as a substitute to the non-renewable fossil fuels

such as the traditional coal fired energy source and to some degree create opportunity for
households who can afford and businesses to set up rooftop solar and thus reduce pressure on the ailing
power supply. 4. Empirical facts of the loadshedding South Africa had its first widespread national
electricity blackout in 2008. Fourteen years later, the problem has reached an apex with continuous
rolling blackouts. It is the result of insufficient electricity generation capacity caused by, amongst other,
ageing infrastructure and a lack of maintenance of the coal fleet at Eskom. Load-shedding reached a
record high in January 2023. The Energy Availability Factor (EAF) averaged around 58% in 2022, down
from 62% in 2021 and 65% in 2020. It remains well below the utility’s target of 75%. The EAF has
averaged 52% thus far this year 2023 and dropped to below 50% for the first time this year in the first
week of January 2023. This has led to load shedding being implemented daily since the beginning of
2023 and is negatively impacting on all sectors of the economy and households. Figure 1 presents the
cumulative amount of electricity shed between 2018 and 2022. Figure 1. Cumulative amount of
electricity shed (measured in GWh) from 2018 to 2022 Source: Eskom Data Portal, BER calculations (data
for year 2023 is up to 14 January 2023) Figure 1 indicates that a total of 8 116 GWh of electricity was
shed in 2022, significantly worse than 1 775 GWh of load-shedding in 2021 as estimated by the Bureau
for Economic Research (BER). There are inconveniences to households due to interruptions to daily
lives and damage to appliances and perishable food items as well as access to service delivery that
relies on electricity like water supply, health, critical government services like home affairs services to
mention a few. Consequently, this will erode the confidence in the government’s ability to discharge its
mandate which in turn has led to calls for economic shutdown which will have further negative impact
on the economy (BER, 2022). The BER estimated the cost to GDP by using the Cost of Unserved Energy
(COUE) to estimate the economic impact of load-shedding. The COUE is the value (in Rands per kilowatt
hour) of a unit of energy not provided because of the unexpected loadshedding of short period. The
latest NERSA approved estimate from Eskom for South Africa’s COUE is R101.73/kWh. This means that

one hour of Stage 1 load-shedding (i.e., when South Africa needs to reduce power usage by around 1
000 MW), costs the country R101.73 million. Similarly, the SARB, BER Used the data from Eskom’s
research portal to calculate the volume of load-shedding per day (in GWh), They calculate the Cost of
Unserved Energy (COUE) for each year since 2018. This provides a range of estimates, depending
on the time of day that load-shedding took place. Table 2 presents the cost of loadshedding and cost of
unserved energy. Table 2. Cost of load-shedding, cost of unserved energy (COUE) equivalent to
R101.73/kwh Source: Eskom, BER calculations.

When considering cumulative load-shedding across all days, any time of day, power cuts are estimated
to have cost the South African economy about R825bn in 2022. However, because most firms and
households are impacted differently by power cuts during the night than during the day, this is most
likely an overestimation of the real economic impact. In the case that weekends and public
holidays are excluded, then consider conventional working hours. The economic cost of load-
shedding in 2022 ranges between R255bn (for the 09:00 to 17:00 timeslot) and R383bn (for the 07:00
to 19:00 time slot). There are many unknowns, including the amount of investment and other
spending foregone. If taking the average of estimates in Table 4 above, the cost of load-shedding in
2022 could have been in excess of R500 billion (equivalent to around 7-8% of GDP). 4.1. Types of
impacts caused by the loadshedding Power cuts have a pervasive effect on society and business,
resulting to an economic cost. These costs can be direct and indirect as well as in varying
magnitudes. At an individual level the costs of load shedding may seem insignificant but when
considering the associated ripple effects, the indirect costs become increasingly significant. Some
impacts do not get quantified (such as reduced investor confidence, reduced competitive advantage,
supply chain disruptions) but they are extremely relevant. Table 3 lists some of the consequences of
load shedding that should be noted. Table 3. Consequences of Load Shedding Sources: Adapted from
Linares & Rey (2013) (R billion) All days, any time of day Excl. weekends Excl. weekends Excl.
weekendsand public holidays and public and publicholidays, only holidays, onlyincl. loa d-shedding
betwe en 07:00 - 19:00 incl. loa d-sheddingbetween 09:00 - 17:002018 22 15.9 14.4 112019 110.9 80.8
54.9 39.82020 129.1 96.2 67.6 49.82021 180.6 134.8 79.6 52.32022 825.7 618.1 383.4 254.8Direct
Economic ImpactIndirect Economic Impact Social ImpactsLoss of production and operationLoss of
corporate and personal incomeRisk to health and safety Damage of equipment and machineryJob
lossesInterrupted communication technologySpoilage of raw material Increased costs to source
alternative energyDisrupted evening studies Increased output prices Disrupted evening entertainment

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 85 85 4.2. Electricity
strategy In formulating a strategy for the energy sector of the country, the National Development Plan
(NDP) refers to a 2030 vision of the country that focus on the competitiveness and growth of the energy
sector. The main objective was to render consistent and inexpensive energy service at acceptable
rates by considering the environment and pollution reduction. In March 2011, the IRP 2010–2030 was
endorsed and served as an electricity infrastructure development plan founded for developing the
minimum price of electricity supply that should meet the demand of the consumers. Figure 6 illustrates
the 2019 IRP energy mix and the 2030 futuristic targets. Figure 2. Integrated Resource Plan (IRP)
generation mix installed electrical capacity, 2018 and 2030 Source: IRP 2019 The figure above shows
governments commitment towards supporting the adoption of renewable energy in the energy mix and
the reduction of coal generated power. The figure indicates an increased reliance from wind energy (4%
in 2018 to 15% by 2030), solar PV energy (3% in 2018 to 10% by 2030) and hydro energy (4% in 2018 to
6% by 2030). 4.3. Loadshedding impact on tax Load shedding undoubtably impacts on the economy
and thus directly influences revenue collections. The discontinuous electricity distribute jeopardises
the total productivity, profitability, and reduces the development of both small and large firms.
Consequently, load shedding has provided new opportunities to entrepreneurs due to involvement
of the government to invest in the exploitation of renewable energy. Meantime, most of big firms are
practising self-generation of energy, which will have considerable spin-offs for the government by
means of adjusting importation taxes. Government has decided to arrange for tax relief of more than
R20 billion and to tackle the inflation tax as both households and firms have showed the willingness to
make use of renewal energy. Households will receive tax relief for the installation of solar panels
while firms will get tax incentive for development of renewable energy. Besides, the diesel fuel
relief will be provided to offset the harmful impact of the escalated prices of the food.

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 86 86 Refund System
was released for the purpose of economic development. When the system was conceptualised and
introduced, industries such as agriculture, forestry, fisheries, and mining were supposed to benefit first
as the main reason was to protect the competitiveness of local domestic most important
producers. In the wake of the increasing levels of load-shedding, businesses are encountering
more losses in revenue due to the incapacity to produce without electricity. In fact, repeated load-
shedding implies that businesses must use more diesel to remain operational. Government could weigh
up expanding the diesel fuel tax refund structure to stimulate strategic sectors that make use of more
diesel to offset the adverse impacts of the load-shedding. The investment in renewable energy, which
will most likely be a great consideration especially by businesses and some households who can
afford, will to some degree help reduce the pressure on ailing power grid. This will contribute to the
increase in rebate claims and thus result in refunds. 5. Methodology A Computable General
Equilibrium (CGE) model research approach is adopted with a focus on the impact of load-shedding
on the South African economy. The database of the model is composed of a social accounting matrix
(SAM) constructed for the year 2015. Amongst all the economic agents captured in the SAM,
particularity is given to the type of poor and non-poor households with a total of 14 households. Factors
of production uses 6 types of employment classified by education levels. Factor demands are deducted
from the first order conditions of companies’ turnover growth while the price of every factor is
deducted from value of its minimal good. Factors can be flexible with difference in prices based on the
kind of activities. Portion of the Rest of the World (ROW) is based on the total assets and liabilities as
captured by the South Africa Reserve Bank (SARB). The maximisation of the turnover of the companies
is subject to a constant elasticity of substitution (CES) production technique by means of a linear
order of factor inputs utilised to produce goods. The structure of production makes provision for each
industry to generate different types of products through usage of factor of production composed of
labour, land and capital. The production function uses a Leontief production function. The imports are
assumed imperfect substitutes for domestic products following Armington (1969, 1970) assumption.
From every product composite there is a constant elasticity of substitution (CES) function of a domestic
product and the imported corresponding product. Below is the summary of the model: 5.1.
Intermediate demands In this model we first add demand for intermediate goods and services by
activities, then introduce activity specific wages and unemployment, and finally allow for savings
and investment. In order to accommodate intermediate demands the following new elements are
added to the model:

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 87 87 Parameters ica
a c amount of c representing the intermediate input per unit of production in industry a Variables
 Net price after deductions of industry a  amount of commodity c representing the
intermediate input in industry a We include two new equations inherent to the prices of value-added:
aca c ac C = - a APVA icaPA P (1) and intermediate demands: c ac a a = c C, a
AQINT QAica    (2) Some changes in other equations are also implemented but not described here.
Nonetheless, it must be noted that the payments for intermediate goods should be included where
commodity rows meet the activity columns. Adding intermediates does not change the accounts in the
SAM (Horridge, Parmenter, & Pearson, 1993). 5.2. Job loss and earnings by activity In this model we
assume that the minimum wage is paid for any labor performed by activity where the price of
factor of production is uniform by activity as well. Although the wages in practices differ between
activities, we treated this case in the model by assuming that wages are misrepresented for labor then
again, the same for all activities where capital is considered with full employment for all factors of
production. Furthermore, on the labor supply side, the model is calibrated by considering the quantity
of labor supply as the market-clearing variable and the number of full-time equivalent employees is
activity-specific, When setting up the model, we ascribed the capital quantities by assuming that the
wage (rental rate) is constant across all activities, but we consider capital to be activity specific. Thus,
the time horizon of this model is of a short to medium term. In doing so, we would expect the rental
rate to vary across activities when the shock is imposed on the modeled economy as opposed to the
factor price equalization process of perfect competition. We assume the following when dealing with
the factor behavior: 1. Description of the original levels of the factor demand variable by activity and
the factor supply parameter (qfsf). 2. Description of the original levels of the average wage variable and
wages by activity. 3. Description of the wage bias parameter as the proportion between

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 88 88 4. The
verification is done whenever there is activity-factor interaction. In this respect, the multiplication 
   should be proportional to the SAM disbursement targeting labour by industry. Factor demand
can now be written as           (3) while factor income is


defined as        (4) Each factor is assumed to transfer income to
households in fixed shares:            (5) 5.3. Saving - Investment In our
model saving must be equal to investment. Nonetheless, savings can be seen as a “leakage” from the
demand system. Savings are pooled to allow for investment to take place. The following modifications
are necessary: Parameters: Two important parameters are required for easy assessment of the savings.
They are composed of household savings shares () and base-year sectoral investment
quantities ( ); Variables: Inclusion of two important variables namely the quantities of investment
demand () and a factor establishing relative changes in investment quantities ().
Equations: Introduction of important equations for the purpose of defining  and checking the
balance between savings and investment amounts. For instance, the equation for the investment can be
portrayed as follow:    (6) While the equilibrium criteria are required between
investment and savings, where savings must balance with investment, a specific variable termed
WALRAS is adopted in this model to balance savings and investment. The savings – investment balance
can then be written as:      (7) In this model, to sustain the
savings-investment balance the number of variables must be proportional to the number of equations
as the value of WALRAS is usually set to zero. Moreover, prior to the inclusion of savings and
investment, S-I is added to the components of the set AC which represents the activity account. In this
set-up we assume that the marginal propensity to save mps is fixed for at least one of the households. In
our model we turn this around and fix investment QINV which allows us to examine the demand
impact of an exogenous increase in investment demand. The income and expenditure from the
household is captured in the SAM which constitutes the database for the

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 89 89 static CGE
model as depicted in equation 8. Yh (i) =YPRIM (i) + YSEC (i) + YTERT (i) + YCAP (i) (8) It is well
known that the government income is always generated from various taxes composed of household
tax (HHTAX), VAT and TARIFF as depicted in equation 9. GR VAT HHTAX+ TARIFFEXPSUB
(9) 6. Results The interpretation of the simulation results is performed based on the kind of shock
occurred in the economy. Prior expectation is taken into consideration before evidencing the
simulation results. We set the exogenous shock on the economy, which is the loadshedding in the
electricity sector. Calculations measuring the impact of the shock are then described as percentage
changes between the values in the baseline simulation and the policy simulation for every single
variable in the model (Erero, 2021). The above information provides an indication on the
macroeconomic impacts of the loadshedding prior to the interpretation of the simulation results
made. The policy shock related to the loadshedding will affect all the industries which are using
electricity as intermediate inputs. Industries using electricity will be negatively affected while those are
not will possibly benefit from the loadshedding. Nonetheless, the productivity gain should result in drop
of prices of output in every industry. In this case, the impact of the loadshedding on the production
function, labor, and GDP development. Table 4 includes the impact of the loadshedding in South Africa.
Table 4. Impact on the Macroeconomic variables (base values and percentage change) Variables
Description Base (2015 R billion) Sim (% change) ABSORP Absorption 2687 0.1417 PRVCON Private
consumption 1586 -2.4138 FIXINV Investment 501 0 DSTOCK Stock -3 0 GOVCON Government
consumption 604 0 EXPORTS Exports 642 -3.1527 IMPORTS Imports -666 -2.1824 GDPMP GDP (Market
prices) 2663 -2.3043 NETITAX Net indirect tax 287 -1.2538 EXRXY Exchange rates 1 0.0046 YGX
Government income 679 -1.5325 Source: Shock results. The impact of load shedding on the
macroeconomic variables is already evident in the GDP figure which showed a contraction in economic
growth by 2.3043% (see Table 4). The same trend is observed in other variables such as consumption (-
2.4138%), exports (-3.1527%), imports (-2.1824%), and net indirect tax (-1.2538%). In fact,
loadshedding has affected the production of most goods and services that relies on electricity as an
essential input. South Africa's energy intensity (the amount of energy used per unit of economic
output) is higher than the global average, making power outages especially costly to the economy. It is
hard to put a monetary value on the cost of load-shedding. Estimates vary depending on the method
and assumptions used.

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 90 90 The PwC
recently estimated that, in the absence of loadshedding, South Africa’s GDP growth rate would have
been 5% points higher in 2022. According to Council for Scientific and Industrial Research’s (CSIR)
available data suggests that the loadshedding cost the economy R560 billion in 2022 (CSIR, 2023). Table
5 presents the industrial output from the simulation results. Table 5. Industrial output Sector Base
(2015 R billion) sim (% change) Agriculture 2 -4.7614 Mining 10 -4.4692 Manufacturing 14 -4.2272 Other
industries 6 -2.0481 Private services 48 -3.9217 Public services 19 -1.5282 Source: Shock results. Table 5
indicates that agriculture, mining, and manufacturing sectors have been particularly hard hit as already
shown in the large contraction of the GDP. Thus, if not mitigated this contraction will have
considerable repercussions on food security in the near future. In fact, current round of loadshedding
affected negatively the irrigation, slaughter businesses, packaging, manufacturing and cold storage
of food goods. While trying to lessen the effect of the loadshedding, farmers are experiencing
substantial cost push inflation resulting from additional cost associated with additional fuel. Besides,
there is rise in labour costs caused by the unproductive production time and inappropriate working
hours organised around blackouts. Although primary and secondary industries are export intensive,
they have poorly performed because of the loadshedding. There are great concerns in the agriculture
industry which relies heavily on cold storage as extended periods of load shedding are threatening the
viability of the industry. The mining industry is heavily reliant on continuous energy supply especially in
the processing, smelting and refining plants. Underground mining also requires absolute energy
certainty to ensure health and safety standards are maintained. Mineworkers cannot go
underground when their safety is compromised due to power cuts as this may result to fatalities. Table 6
presents the impact of loadshedding on the labour. Table 6. Labour Variables Description Base (2015 R
billion) sim (% change) flab-p Primary education 77 -5.2632 flab-m Middle education 208 -4.1423 flab-s
Secondary education 387 -3.9811 flab-t Tertiary education 541 -1.3184 Source: Shock results. Table 6
indicates that loadshedding negatively impacted all labour categories where the hardest hit is
employment with primary education (-5.2632%). Besides, the unemployment rate in South Africa was
already high even before the resurgence of the global pandemic. It must be noted that all the industries
have already had a tough moment recuperating from the previous devastation caused by the
lockdown protocols. In this respect, they are forced to come with new plans to muddle through the
negative effect of load-shedding in conjunction with the previous shortfall. Those industries are

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 91 91 at risk especially
for the perishable stocks which require uninterrupted power supply. More jobs have been shed as
the country’s economy is facing an unprecedented scenario with loadshedding not only impacting
food security and mobile networks, but business sectors and industries at large. Table 7 presents the
impact of loadshedding on the government revenue. Table 7. Impact on the government revenue
Description Base (2015 R billion) Sim (% change) Direct revenue excluding dividend tax 396 -3.6218
Activity tax revenues 38 -4.5386 Import duty revenues 23 -2.3253 Sales tax revenues 226 -5.4329
Transfers received from factors 52 -2.1052 Transfers received from ROW -30 -1.4286 Source: Shock
results. Table 7 indicates that loadshedding negatively impacted the government tax revenue. Load
shedding undoubtably impacts the economy and thus directly affects revenue collections. For
example, in the mining industry revenue losses will impact Government’s ability to earn revenue
from taxes and royalties. Some firms are wasting billions of rands in income just because of the
loadshedding. In fact, more diesel through generators must be consumed to remain operational.
The Diesel Fuel Tax Refund system will be impacted by the increased reliance on diesel by industries
such as agriculture, forestry, fisheries, and mining. Because load shedding affects all industries,
government should revise the base of the diesel fuel tax refund by bringing in identified strategic
sectors that consume more diesel to counter the consequences of the load-shedding. Table 8
presents the impact of loadshedding on the household spending. Table 8. Household spending
Variables Base (2015 R billion) sim (% change) POOR 273 -4.3925 hhd-0 27 -5.2836 hhd-1 47 -4.1083
hhd-2 57 -4.0985 hhd-3 65 -3.2187 hhd-4 77 -2.4278 NPOOR 1313 1.8592 hhd-5 89 -2.7342 hhd-6 108 -
2.4121 hhd-7 151 -2.4001 hhd-8 287 -2.1051 HHD-9 677 -1.0263 hhd-9-1 84 -1.0141 hhd-9-21 98 0.9251
hhd-9-22 118 1.3768 hhd-9-23 144 1.4823 hhd-9-24 234 2.6245 ALLHHD 1586 1.4275 Source: Shock
results. Table 8 indicates that the household consumption is grouped according to the income sources
which are poor and non-poor households. Poor households take-home pay from work only while
non-poor households get

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 92 92 earnings from
other income sources such as capital, land, and labor. Usually, households own factor inputs subject to
budget constraint inherent to the share of factor income, transfers from the government and other
businesses. Even so, households show a discrepancy in their dynamic holdings and earnings. Our
simulation results indicate that the loadshedding pushed down the household earnings of all recipient
households with exception of the top non-poor households. This substantially worsened the level of
consumption expenditure and welfare of poor households. Consequently, loadshedding played a
destructive role in hurting economic growth irrespective of the previous shock which caused the
income loss of the households from the lockdown. The power cuts not only disrupt the functioning of
the economy and households but also carry with its price effects on the cost of running business and
cost of living and thus negatively impact on the growth trajectory of the economy which was recently
eroded by the spread of the COVID-19 pandemic. The SARB Monetary Policy Committee (MPC) stated in
its latest statement that due to load shedding, the GDP growth is forecasted at 0.3% for 2023. Given the
severity of load-shedding, the Bank projects that it will reduce growth by up to 2 percentage points
in 2023, as opposed to the earlier prediction of 0.6 percentage points (SARB, 2023) 7. Policy
implication It would be prudent for the government to consider the development of an industrial policy
plan to support increased localisation of solar and wind energy components. Increased local
production would support economic growth, employment creation and reduce the risk associated
with global supply chains. The local production of most of the components would also support the
rapid uptake of renewable energy sources by industry, government, and households. The renewable
energy industry would also offer various economic opportunities across its value chain consisting of
purchasing, producing, carriage, setting up, grid fitting, management, and preservation as well as the
discharging phase. 8. Conclusion This paper evaluated the impacts of the loadshedding in South Africa.
We evaluated the general equilibrium impacts of the loadshedding by means of a CGE model adjusted to
South African’s social accounting matrix (SAM) for 2015. One policy simulation inherent to
loadshedding is considered. The impact of load shedding on the macroeconomic variables was already
evident in the GDP figure which showed a contraction in economic growth by 2.3043%. Our
simulation results show that loadshedding undoubtably impacts the economy and thus directly affects
revenue collections. For example, in the mining industry revenue losses will impact Government’s
ability to earn revenue from taxes and royalties. The application of the CGE model for analysing
the impact of the loadshedding in South Africa constitutes the originality of this study. In brief,
three essential contributions are put forward in this article: Loadshedding has been disrupting the
functioning of the economy and households by carrying its price effects on the cost of running business
and

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 93 93 cost of living
and thus negatively impact on the growth trajectory of the economy which was recently eroded by
the spread of the COVID-19 pandemic. Given the gravity of load-shedding, the national Bank projects
that it will reduce the economic expansion by approximately 2 percentage points in 2023, as opposed to
the earlier prediction of 0.6 percentage points (SARB, 2023).  Firstly, a matter-of-fact policy shock
concerning the loadshedding which has developed new socio-economic behaviour in South Africa.
The country’s economy is dealing with an unprecedented scenario with load shedding not only
affecting food guarantee and communication networks, but business sectors and industries in general.
The simulation results show that loadshedding negatively impacted the GDP and welfare of citizens. This
was accomplished by means of the CGE examination.  Secondly, our research contributes to the body
of knowledge on the effect of load shedding in South Africa as well as the opportunities that exist in the
adoption of renewable energy sources.  Thirdly, our research provided the country with an economic
tool for policy evaluation. It would be prudent for the government to consider the development of an
industrial policy plan to support increased localisation of solar and wind energy components.
Loadshedding has already caused significant damage to the country’s economy, a review of
respective industry impact indicates that there is an overall negative impact although the extent
differs. The methods applied in this research article are appropriately documented for the elaboration of
other models to be used for further studies.

Journal of Economics and Political Economy J.L. Erero, JEPE, 10(2), 2023, p.78-94. 94 94 References
Akinbani, O.M., Oke, S.R. & Bodunrin M.O. (2021). The state of renewable energy development in South
Africa: An overview. Alexandria Engineering Journal, 60(6), 5077–5093. doi.
10.1016/[Link].2021.03.065 Akinboarde, O.A., Niedermeier, E.W., & Sibanda, F. (2002). The Impact of
Electricity Trade in the Environment of South Africa, 2002 Annual TIPS Forum, Johannesburg, South
Africa. accessed 13 December 2022. [Retrieved from]. Armington, P.S. (1969). A Theory of Demand for
Products Distinguished by Place of Production. International Monetary Fund Staff Papers. 16, 159- 176.
doi. 10.5089/9781451956245.024 Armington, P.S. (1970). Adjustment of trade balances: Some
experiments with a model of trade among many countries. IMF Staff Papers, XVII, November, pp.488-
523. Assistant Secretary for Energy Technology. (1978). Impact Assessment of the 1977. New York City
Blackout. New York City: The U.S. Department of Energy. Bureau of Economic Research (BER). (2022).
Coast of loadshedding. accessed 5 January 2023. [Retrieved from]. Checchi, A., Behrens, A., &
Egenhofer, C. (2009). Long-Term Energy Security Risks for Europe: A Sector-specific Approach. CSIR.
(2019). The State of Logistics Survey for South Africa. accessed 13 December 2022. [Retrieved
from]. CSIR. (2020). Loadshedding in South Africa, accessed 2 April 2023. [Retrieved from]. CSIR. (2023).
Boost local solutions for sustainable energy storage, accessed 13 December 2022. [Retrieved from].
DME, (1998), Digest of South African Energy Statistics. accessed 11 December 2022. [Retrieved from].
Erero, J.L. (2021). Contribution of VAT to economic growth: A dynamic CGE analysis. Journal of
Economics & Management, 43, 26-55. doi. 10.22367/jem.2021.43.02 Eskom, (2023). Surplus Capacity-
why we no longer have it: Fact Sheet. accessed 12 December 2022. [Retrieved from]. Findt, K., Scott,
D.B., & Lindfeld, D.C. (2014). Sub-Saharan Africa Power Outlook. KPMG Infrastructure & Major
Projects Group, Johannesburg: KPMG. Horridge, J.M., Parmenter, B.R. & Pearson, K.R. (1993). ORANI-G:
A general equilibrium model of the Australian economy. Generic version. Revised March 1997. Le Roux,
M. (2006). Mbeki: there is no electricity crisis, Mail and Guardian Online, 30 March 2006. Linares, P., &
Rey, L. (2013). The costs of electricity interruptions in Spain: Are we sending the right signals? Energy
Policy, 61. 751-760. doi. 10.1016/[Link].2013.05.083 Loschel, A., Moslener, U., & Rubbelke, D.T.
(2010). Indicators of energy security in industrialisation countries. Energy policy, 38(4), 1665-1671.
doi. 10.1016/[Link].2009.03.061 National Energy Regulator of South Africa (NERSA), (2007). An
Independent Electricity Suppply Industry Risk Addessment and Mitigation Strategies. National Treasury.
(2023). Budget Review, South Africa. [Retrieved from]. SARB. 2023. Quarterly bulletin., access date. 07
December 2022. [Retrieved from]. SARS. 2023. Annual Report. Pretoria. access date. 07 February 2023.
[Retrieved from]. Shanghvi, A. P. (1991). Power shortages in developing countries. Energy policy, 19(5).
425-440. doi. 10.1016/0301-4215(91)90020-O Standard Bank. 2023. Electricity Tracker March 2023.
Stats SA. (2022). Annual Financial Survey. [Retrieved from]. Winzer, C. (2012). Conceptualizing energy
security. Energy policy, 46, 36-48. doi. 10.1016/[Link].2012.02.067 Copyrights Copyright for this
article is retained by the author(s), with first publication rights granted to the journal. This is an open-
access article distributed under the terms and conditions of the Creative Commons Attribution license
([Link]

Citations (21)
References (22)

... Loadshedding is the interruption of an electricity supply to avoid excessive load on the generating
plant. This loadshedding frustrates the smooth performance of the economy and households by carrying
its price effects on production and living costs, and thus negatively impacting the expansion of the
economy, which was recovering from the devastating consequences of the COVID-19 pandemic (Erero
2023). The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) pointed out that the
GDP growth is predicted at 0.3% for 2023 mainly due to loadshedding. ...

... Nonetheless, when taking into consideration the sternness of loadshedding, the Bank estimated that
it will push down growth by up to 2 percentage points in 2023, as opposed to the prior forecast of 0.6
percentage points (SARB 2023). In understanding the impact of loadshedding, a previous study
conducted by Erero (2023) shows that there is an overall negative impact of loadshedding on the
economy, even though the magnitude varies. ...

Customs Revenue in the Renewable Energy Sector: Evidence from South Africa

Article

Full-text available

Apr 2024

Jean Luc Erero

View

Show abstract

... This resulted in alternating energy load-shedding to manage equitable distribution of limited energy
supply. The disruptions arising from energy rationing affected the socio-economic life of citizens and
obstructed continuous business activities amid high cost of operations as standby energy generation
machines of corporations were in constant use to fill the energy loadshedding vacuum [4,5]. The South
African energy shortage thus affected the entire economyfrom household to small and large businesses,
with negative effect on the attraction of foreign investments [2]. ...

A differential effect of energy instability on share price and income statement

Article

Full-text available

Dec 2024

C.C. Ngwakwe

View

Show abstract
... For the two systems, hydroponics and the soilless culture, commercial farmers use synthetic and
inorganic fertilizers to formulate the nutrient solutions, which comes at a costly price to farmers. In
addition, South African growers and farmers are faced with an energy crisis, where electricity bills are
charged at higher prices for farmers and are also unreliable (Erero, 2023). The establishment of a
successful production system requires four to six multi-span tunnels of tomatoes to break even;
therefore, hydroponics is deemed as a highly demanding system that requires a greater amount of
product knowledge, experience, technical skill, and financial investment than many other greenhouse
production systems (Combrink et al., 2019); thus, this remains a challenge for emerging farmers and
smallholder growers in South Africa. ...

Insights on the prevalence of phyllo-epiphytic and endophytic pathogens on leafy vegetables from farms
and retails in South Africa: A review

Article

Full-text available

Dec 2024

Dineo Attela Mohapi

Jane Nkhebenyane

Oriel M M Thekisoe

Zenzile Peter Khetsha

View

Show abstract

... In recent years, South Africa has faced the challenge of severe power shortages [37]. According to
data from the Department of Statistics ([Link] in 2020 and 2021, South Africa's
cumulative annual power outages were as high as 859 hours and 1,169 hours. ...

Assessing Electricity Supply Reliability by Detection of Anomalies in Daily Nighttime Light

Article

Full-text available

Jan 2024IEEE J-STARS

Miaoying Chen

Yang Hu

Xin CaoLuling Liu

View

Show abstract
... Eskom needs to shed between 1,000 and 6,000 MW of the national load, depending on the stage of
load shedding implemented (Eskom, 2024a). The severity of load shedding has increased substantially
and corresponds with the decrease in the energy availability factor from 2018 onwards (Erero, 2023).
Figure 1 illustrates the correlation between the energy availability factor and the imposed load shedding
hours as a percentage of total annual hours per year from 2015 until 2023. ...

Incentives and drivers for private embedded generation through solar photovoltaic systems in South
Africa

Article

Full-text available

Dec 2024

Louie van SchalkwykMichelle Scholtz

View

Show abstract

... Previous researches have been conducted on the impact of load-shedding in South Africa on the
health sector (Gehringer et al., 2018;Ndaguba, 2018;Bantjes & Swartz, 2023;Wood, 2023), hospitality
industry (Steenkamp, 2016;Tembe & Hlengwa, 2022), industry or industrial growth (Ateba et al.,
2019;du Venage, 2020), retailers or other businesses (Mbomvu et al., 2021), country's economy
(Lenoke, 2017;Erero, 2023;Naidoo, 2023), and the restaurant industry (Botha, 2019). Generally, load-
shedding is impeding the effectiveness of operations and productivity in various sectors of the South
African economy. ...

Assessing how Load-shedding affects the Generation of Household Food Waste in Merafong City Local
Municipality.

Article

Oct 2024Dev South Af

Nkosinathi Simon DlaminiIsaac Tebogo Rampedi

Phyllis Rumbidzai Kwenda

View

Show abstract

... Africa. South Africa faces the worst rolling blackouts in the country's history [20]. These rolling
blackouts, locally called load-shedding, are planned electricity outages implemented in different
stages. ...

The Devil is in the deployment: Lessons learned while deploying an AI and IoT-enabled hydroponics
grow tent with rural subsistence farmers in South Africa

Conference Paper
Aug 2024

Taryn WilsonHafeni Mthoko

Yusra Adnan

Sarina Till

View

An Analysis of Mediated/Online Disparities of Access and Representation in the Fourth Industrial

Article

Apr 2025Communicatio

View

Olefin selectivity of K-Mn promoters on CoFe-ZSM-5 based catalyst in CO2 hydrogenation

Article

Full-text available

Feb 2025

Paula MasekoMduduzi N. CeleMasikana M. Mdleleni

View

Show abstract

A computable general equilibrium model of the monetary policy implications for financial stability in
South Africa

Article

Jun 2024S AFR J ECON

Conrad Beyers

Kojo A. Essel-MensahDimitrios P. Tsomocos

View

Show abstract

Show more
Recommended publications

Discover more

Article

Full-text available

Customs Revenue in the Renewable Energy Sector: Evidence from South Africa

April 2024 · Borders in Globalization Review

Jean Luc Erero

This report assesses the effects of customs revenues in the renewable energy industry in South Africa.
After ESKOM (State-owned enterprise) presented the firm’s biggest loss of R9.7 ($0.6) billion in August
2009, several applications for higher tariffs were performed over the years. South Africa has been going
through an energy crisis, with more loadshedding expected in 2024, which is predicted ... [Show full
abstract]

View full-text

Article

Full-text available

Issue 1-2 Impact of special COVID-19 social relief of distress grants in South Africa: A CGE analysi...

June 2024

Jean Luc Erero

This paper assesses the outcomes of the Special COVID-19 Social Relief of Distress Grants (SRDG)
program. A gratuity of R350 ($26.5) per person and per month was granted to low-income households
following a national lockdown on 26 March 2020, aimed at alleviating the spread of the COVID-19
pandemic. Although, children and elderly grants are excluded from this program, the study focuses on
cash ... [Show full abstract]

View full-text

Article

Full-text available

Impact of excise tax on the South African economy: A dynamic CGE approach

September 2019 · Journal of Economics and Management

Jean Luc Erero

Aim/purpose – This paper analyses the impact of excise tax on the South African econ-omy by means of
a Dynamic Computable General Equilibrium (CGE) model. We uti-lised a policy simulation to evaluate
the effects of an excise tax, with the results indicat-ing that the rise in excise tax should not impinge on
lower revenue households, as long as the greater government revenue flows to those ... [Show full
abstract]

View full-text

Article

Full-text available

Contribution of VAT to economic growth: A dynamic CGE analysis

December 2021 · Journal of Economics and Management

Jean Luc Erero

Aim/purpose – This study sought to assess the impact of an increased historical fixed VAT rate of 14% to
the current rate of 15% on the South African economy. Design/methodology/approach – The method
applied in this study was based on a Dynamic Computable General Equilibrium (CGE) model to evaluate
the impact of both the VAT rate of 14% and a new rate of 15% on the South African economy. The
CGE ... [Show full abstract]

View full-text