Estimating the macroeconomic costs of power outages in South Africa

Richard Kima, a Research Fellow at UNU-WIDER / SA-TIED, will present research at the Academic Seminar Series that will be held on 6 November, 2023 at the University of Pretoria. His paper, "Estimating the Macroeconomic Costs of Power Outages in South Africa," goes beyond traditional economic models to explore the impact of power outages on South Africa's economy. Kima's research leverages a structural dynamic macroeconomic model calibrated to the South African context, offering a comprehensive analysis of short and long-term effects.

Kima's preliminary findings are striking: his preliminary findings suggest that the monetary costs of unadjusted load-shedding for the South African economy were about R 911-billion in 2022, i.e., R 632-billion in real terms, representing an output loss of 13.7%. When adjusted for weekends,  holidays, and outside working hours, the nominal costs drop to R 162-billion (i.e., R 112-billion in real terms), corresponding to an output loss of 2.4% and an adverse impact on GDP growth of 2.5 percentage points.

Unlike most studies that focus solely on short-term effects, his paper adopts a general equilibrium approach, accounting for both short and long-term consequences. It delves into the direct and indirect costs of load-shedding within a real-world structural framework. His presentation at the Academic Seminar Series seeks to engage with peer economists and gather invaluable feedback to refine the research. This collaborative approach ensures the paper's quality and accuracy and contributes to a deeper understanding of the economic challenges posed by power outages in South Africa.