QUESTION THREE (20 MARKS)

Read the case the case study and answer the questions that follow

Uncertainty in power supply hinders economic growth

South Africa (SA) has a major electricity power supply problem. Eskom is the single major power utility supplier in the country. It turns out, Eskom cannot cope with electricity demands to keep the lights on. This is very evident in the continuous power outages experienced throughout the country recently. This power crisis has and still is contributing to the slow growth in the whole economy. Despite the efforts to speed up new power stations under construction, supply prospects are rather bleak in a short-term. As a matter of fact, the power stations being erected are behind scheduled timeframes to come into stream. President Jacob Zuma on his State of the Nation Address (February 11, 20015) hinted that the current energy constraints are a serious impediment to the economy experiencing any growth in the future.

The society has felt the full might of load-shedding scheduled by the power utility. Eskom has been forced to implement controlled power cuts in SA this year to prevent the national grid from being overwhelmed. SAs government says the electricity outages are expected to last two years, Business Day reported (April 10, 2015). There is an adder: this power crisis has resulted in eroding business confidence and undermining/deterring efforts for potential investments broadly. In the business sector, SMMEs were affected adversely by this perpetual phenomenon others suffered a fatal blow.

Eskom made continuous appeals to all sectors of the economy to preserve and scale back on power consumption. On mining.com (February 6, 2015), Economist Mike Schussler said, this will particularly hit heavy industry and small businesses very hard so I think right now it comes at the worst time, just as we were gathering pace for a recovery. The rippling effects on potential economic gains and developments have declined. All the efforts to become a global player have been weakened too. Actually, SAs global competitiveness suffered an enormous setback. Rating agency, Standard & Poor (S&P), downgraded Eskoms long-term credit rating to BB-plus following the suspension of four board members on March 19, 015.

The alarm bells sounded and pointed at the lack of foresight, poor planning and lack of proper investments commensurate with maintaining and building the right capacity to align power supply to the needs of a young and flourishing democracy. The power is no longer an Eskom problem; its a national problem, the acting CEO of SA Chamber of Commerce (Sacci) Peggy Drodskie said. In the final analysis, the collective efforts from government, the business sector and the broader community needed to build and inject a much-needed impetus in an already struggling economy have been retarded.

3.1.1 What are some of the barriers that led to this situation where the Eskom executive board failed to understand the growing demands for power supply and plan accordingly? (10) 3.1.2 Recommend ways by which the power utility top management can be assisted to better prepare for effective planning (10)