South Africa's economy is showing signs of picking up, but that's also raising fresh concerns about the nation's power supply as the World Cup nears, analysts said.

Officials at the parastatal energy giant Eskom say they are confident they will not have any blackouts during the matches, which kick off on June 11 and run for one month.

But South Africans have sharp memories of nationwide power failures in January 2008, which shut down the critical mining sector, hobbled factories and left cities plunged into darkness for days.

Strain on the electricity supply eased as the global recession sapped mining orders and cut demand for power from the energy-intensive industry.

Now gold prices have soared over 1,000 dollars an ounce, and other parts of the economy are also showing signs of improvement, raising new concerns about how Eskom will manage as demand increases.

"We are already seeing signs of increased activity in manufacturing, mining and other industrial activities," said energy analyst Cornelis van der Waal, of Frost and Sullivan consultancy.

That, he said, will test Eskom's capacity by early next year.

"At the current moment the reserve margin is below 10 percent, which makes it difficult because if there is breakdown in the system it will result in short or long term blackouts."

Eskom hiked tariffs 27.5 percent last year and 31.3 percent this year, with a third increase already proposed but is still struggling to finance an ambitious expansion scheme.

Eskom needs 385 billion rand (47.8 billion dollars, 34.4 billion euros) to build new power stations. Two are under construction but will be operational in 2012.

Still, Eskom said it would have a stable power supply during the World Cup.

"Eskom is confident that it will be able to ensure reliable power supply for 2010," company spokesman Fani Zulu told AFP.

The company is examining the integrity of the electricity supply chain, working with municipalities and World Cup host cities to ensure that the grid is up to the job, Zulu said.

South Africa has also entered an agreement with neighbouring countries to pool their power supplies during the World Cup to provide a back-up in case of any shortages.

Zulu admits that South Africa's electricity supply will remain under pressure for at least five more years, until the new plants are built.

Until the economy hit a recession this year, South Africa had experienced steady growth since the end of apartheid, while the democratic government has expanded access to electricity to larger parts of the population.

Eskom has received loans from international lending agencies for its expansion, but the company struggled financially with a 9.7-billion-rand loss in the last fiscal year.

South Africa needs to build 40,000 megawatts of new generation capacity by 2025. Stations to generate 12,476 megawatts are already under construction.

Independent energy consultant Andrew Kenny said one problem is that electricity has been far too cheap, meaning Eskom historically hasn't earned enough revenue to cover its expenses.

More price increases will be needed, and Eskom will still have to borrow money to keep operating, he said.

"It is going to hurt when getting an increase but it has to be done," he said.

Despite Eskom's problems, Van der Waal said most of the increased demand during the World Cup would be residential, a relatively small part of the total production.

"The majority of the demand for electricity will residential areas and that is not going to be big. Eskom should be able to handle that," he said.

AFP

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