Since load-shedding began in 2007, heralding the start of a prolonged electricity crisis in South Africa, the average cost of electricity has risen 290%, weighing on business confidence and economic growth. "Electricity is similar to the blood of any modern economy. Higher electricity prices equal higher input costs, which lead to lower profit margins for producers and higher prices for consumers," said Fanie Joubert, a consulting economist at Third Circle Asset Management.The effect: a knock on confidence.The South African Chamber of Commerce and Industry's Business Confidence Index was at 79.6 last month - the lowest since 1993.It was dragged down, according to the chamber, by a volatile rand and the debacle late last year when President Jacob Zuma fired Nhlanhla Nene as finance minister.story_article_left1Global factors such as weak commodity prices and a low demand for commodities also influenced confidence.But Joubert said there was still a strong correlation between electricity and the index."It is evident that producers are very worried about electricity supply [and the] effect this has on businesses' ability to plan ahead, and, ultimately, confidence in the economy."This is especially the case in the mining, manufacturing and agriculture sectors, which use about 58% of South Africa's electricity, according to StatsSA.Although data from StatsSA showed that in November electricity production increased 0.4% monthly and 0.7% in the three months ended November, the overall trend in electricity production had declined since 2011.On an annual basis, production figures also show a decline of 1.5%.StatsSA data shows electricity consumption decreased 2.4% year on year and 0.3% monthly, reflecting a drop in demand due to constrained global demand for commodities in the manufacturing sector, the largest consumer of electricity in the industrials sector.Roger Lilley, an energy analyst at EE Publishers, said that with South Africa's current electricity production and consumption numbers, Eskom would not be able to deliver if economic growth was fast.The decline in demand for electricity was one of the reasons that Eskom had been able to keep the lights on without load-shedding recently.Richard Downing, an economist at the chamber, said electricity would continue playing a role in doing business in South Africa, along with global economic and political issues faced by the country."It will be very difficult to get the business index to a better level if the economy doesn't improve."With Medupi behind schedule and the long planning of nuclear power, Eskom is one of the main reasons [for a weak index], because it prevents the economy from performing at its capacity," he said.Yet, despite the pressure many companies have faced with sharp increases in electricity costs, some have found ways to reduce the impact, at least in part.Arno van der Merwe, CEO of Mercedes-Benz South Africa, said they had reduced the hours spent per vehicle produced by 44% over the past seven years, while increasing the number of vehicles produced .An Anglo American Platinum spokesperson said the company had put energy-saving measures in mine ventilation and pumping systems, and wasplanning to reduce costs through the "accelerated and more aggressive strategic restructuring of [its] global asset portfolio".In the gold sector, the Chamber of Mines said, electricity in 2014 accounted for 17% of total costs, up from 11% in 2005.story_article_right2It had predicted that this percentage would be at 23% by 2018. Of other costs, such as labour and other production , electricity and water were the highest costs incurred in the mining sector."Mining companies have implemented a number of initiatives to reduce electricity consumption," said a spokesperson."But given that ventilation and refrigeration are so central to deep-level mining, there are limits to possible energy-saving programmes."The National Energy Regulator of South Africa approved a 12.69% tariff hike for Eskom in its 2015-16 financial year, yet the consumer price index, according to Eskom, was forecast at 5.7% this year.The utility was looking to apply for another increase to tariffs this year.This leaves the manufacturing, mining and agriculture sectors vulnerable, with no other choice but to find ways of cutting costs to try to keep business running at high production.As 2015 ended with the lowest reading for the Business Confidence Index in 23 years, the challenges businesses faced last year would persist in 2016 with no sign of an improvement likely, Downing said...