Can Electricity Be Weighed in Gold?

There are very few businesses that do not depend on electricity. Shoe-shiners and rickshaw drivers are such rare exceptions. Pretty much every other business needs electricity. Some businesses, however, need enormous amounts of electricity: aluminum smelters, for example, or mines.   

In South Africa, the gold and platinum mining industry alone accounts for 15% of the national electricity consumption. On January 25th the sector experienced a huge shock when the state-owned electric utility Eskom informed the big mining companies that it could only provide for 50% of the mines’ usual needs for the months to come. The consequence? Mines had to be shut down. You don’t want your miners stuck hundreds of meters deep below the surface and see the light suddenly go off.

Repercussions could also be felt outside the country. South Africa being the largest producer of platinum in the world and the second largest gold producer, prices for those two metals went through the roof at the Bullion Market in London.

Luckily for the industry mining is an important driver of the country’s economy, accounting for a significant part of its GDP and exports. Analysts reckon that 600m rand (80m US$) of export revenues were lost for every day that the mines were not in operation. Hence, industry representatives had a strong argument, and after 5 days they had convinced Eskom and its main shareholder, the Government, to guarantee them “at least” 90% instead of 50% of their usual electricity needs.

Naturally, given that supply has not miraculously increased over night in South Africa, someone else has to “shed the load” to make this deal with the mining companies possible. Meaning someone else in the country has to accept that his or her electricity is shut off even longer. And who would that be other than those with the least bargaining power? Private households and small and medium enterprises.

To get a better measurement of this, Doing Business is currently developing a set of new indicators that try to reflect the availability of electricity for businesses around the world, in particular for small and medium sized ones.

In Argentina, another country where power is scarce these days, the newly elected President Christina Fernandez de Kirchner came up with a different plan. She issued a decree shifting time on Argentinean clocks one hour forward. When her countrymen rise from their beds in the morning and go to work, it is still dark but they have daylight until late in the evening and hence switch on their lights for less time. Unfortunately, this trick would not work in South Africa. When a non-negligible fraction of your GDP is produced underground, daylight savings do not go a long way.