Besides the immediate period ahead of the FIFA 2010 World Cup, much of the emphasis in the power sector in recent years has been on the surging prices rather than on the supply-side threats.

This focus was only natural in the context of a lower-than-expected recovery in demand following the global financial crisis and South Africa’s own 2009 recession. Warnings about the potentially dire economic and firm-level consequences of the country’s steeply rising price path were equally justifiable.

Some research showed, for instance, that industrial electricity prices were rising faster domestically than anywhere else in the world – a major problem given the energy-intensive nature of the economy. There were also suggestions that certain industries faced the very real prospect of becoming entirely uncompetitive unless the price path was moderated. One survey of energy intensive companies showed that power as a percentage of production costs were, in some instances, poised to rise from 25% in 2007 to over 50% by 2015.

To some extent, the authorities paid attention to these warnings, as demonstrated by the recent announcement by the National Energy Regulator of South Africa (Nersa) that Eskom’s tariffs would rise by 16% from April 1, 2012, rather than by the previously sanctioned 25.9%.

There is also an acknowledgement that South Africa will have to “smooth” its future price curve in a way that results in a more incremental transition to cost-reflective tariffs. How this acceptance will eventually play out precisely is not yet certain. But it appears that Eskom will apply for increases over a longer horizon than the three years currently allowed under the multiyear price determination period (MYPD) used by Nersa. In other words, when Eskom submits its third MYPD application in June it is likely to be for a period of either five or seven years to offer certainty to consumers and investors on the transition to cost reflectivity.

But there is an equally pressing need for South Africans to start paying attention to the country’s immediate power supply constraint, which Absa Capital has warned has the potential to act as a “hand brake” on the country’s gross domestic product (GDP) growth outlook.

In fact, economist Jeffrey Schultz has cautioned that the shortfall as one of the two key “idiosyncratic” factors that will act as a drag on economic expansion during 2012, as well as over the medium term – the other being the country’s volatile industrial relations environment.

South Africa’s electricity supply shortage has already seen some large industrial users being asked to curtail their demand and the first significant additional supply is only expected to materialise in 2014/15 as the Medupi power station begins ramping up from the end of 2013.

Eskom has called on South Africans, particularly large power consumers, to reduce electricity demand by 10%, or some 3 000 MW, to create the savings certainty needed to enable it to ramp up planned maintenance, as well as to create the space for growth-supporting new connections.

But demand-side responses will take us only so far. Therefore, it is vital that the Department of Energy moves with some urgency in not only gathering information on potential near-term base-load potential, but in initiating a procurement programme.