The football World Cup in South Africa is now less than three months away and the tension is starting to build for the participating teams. However, away from the sporting excitement questions are being asked about whether the country's electricity grid can cope with the additional demand generated by 450,000 visiting fans. Due to chronic underinvestment, Eskom, the South African power utility, is struggling to keep up with existing demand.
Two years ago, the situation reached breaking point and rolling blackouts – called load shedding – were introduced across the country. This caused significant harm to the economy as a number of South Africa's big mines were forced to shut down. They were then rationed in their electricity consumption for months, reducing mine production and causing the price of platinum, gold and ferrochrome to spike.
Since that crisis, Eskom has been bailed out by the recession, which has reduced power demand from industrial users, but the situation is again becoming critical as South Africa heads into its winter months and the World Cup. Some customers have been asked to reduce their power consumption during the tournament but if this action is insufficient load shedding will have to be introduced again. This could result in another spike in metal prices.
When it comes to electricity, failing to invest in the appropriate infrastructure can be a really costly mistake.
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