By Lehlohonolo Lehana.
South African Reserve Bank (SARB) through the Financial Sector Contingency Forum (FSCF) is planning for a potential collapse of the national electricity grid which could impact the country’s financial and monetary system.
The Bank released the statement on Tuesday as Eskom announced that it would implement stage 6 load-shedding until further notice as a number of units at multiple stations faced myriad challenges at the weekend.
The FSCF was established under former Reserve Bank governor Tito Mboweni in 2001 after the 9/11 attack on the World Trade Centre in the US. The forum allows the finance sector and regulators to discuss financial stability concerns regularly.
While the central bank stressed that it is unlikely that a regional or national grid failure could occur, as part of its mandate to maintain financial stability in the country, it must look into such systemic risks.
The bank has been preparing plans to respond to a national or regional electricity grid failure since 2015, noting that the preparations form part of its responsibility to compile and test crisis management plans.
“As part of these preparations, the FSCF has been in regular contact with Eskom, the petroleum industry and the telecommunications industry. The FSCF also conducts periodic crisis simulation exercises to test the financial sectors’ ability to respond to such shocks,” said the bank.
“Crisis management plans are typically based on a range of likely but low-probability scenarios, and the fact that a crisis management plan exists should not be interpreted as a signal that the SARB is anticipating specific scenario to materialise.”
The FSCF has since been formally constituted under South African law and is now tasked with assisting authorities in identifying and mitigating risks that could threaten the functioning and stability of the country’s financial system.
“Such risks include the possibility of terror attacks, disruptive cyberattacks, pandemics such as Covid-19 and interruptions of physical infrastructure such as water, telecommunications and electricity,” said the SARB.
“Summarily, the FSCF helps to test and enhance the financial system’s resilience to respond to any such shocks.”
The FSCF currently consists of the government and financial sector heavyweights, including the deputy governor of the SARB, Kuben Naidoo as chairman and members ranging from the National Treasury to the Financial Sector Conduct Authority, among others.
The likelihood of a national grid shutdown is not out of the realm of possibility, with many experts warning that the situation in the country is more dire than authorities are letting on.