JOHANNESBURG: Question: What did South Africans have before candles? Answer: Electricity. This joke, doing the rounds on the country's radio stations, belies the frustration of South Africans after weeks of power cuts that left households and businesses in the dark, and even forced the major mines to close for five days.

With major extra capacity not due to come on-stream until 2012, the government has asked all users - domestic, industrial and commercial- to reduce electricity demand by 10%.

The state-owned utility, Eskom, which supplies 95% of electricity, has around 25% of capacity down due to planned and unplanned maintenance, and coal supply problems due to heavy rains. It also says demand has grown too fast.

Until mid-January Eskom got away with the occasional outage, but when its reserve demand capacity slipped to 8%, compared with best practice of 15%, it needed to reduce demand - a process it calls "load shedding" - in order to avoid a national blackout.

The power cuts are supposed to be planned - you can check your turn on the Eskom website - and last for two hours, but they can go on for longer and come unannounced.

Eskom will now implement a strategy, including quotas, to reduce demand by 3,000 MW by 2012 - around the amount to power Johannesburg.

It has a five year R300billion (€26.8 billion) expansion plan in place, to be partly funded by price hikes. It has warned that "load shedding" will continue in February, with power rationing likely until July, though it aims to make the cuts more predictable.

Around 5% of electricity is exported, which caused some disruption to neighboring countries like Zimbabwe, Botswana and Namibia.

The Economist Intelligence Unit has trimmed its forecast for 2008 growth, from 4.7% to 4.2%, and the South Africa's chamber of commerce has warned that the power shortage poses a severe threat to the production capacity for good and services.

It said the country could be headed for recession after its business confidence index for January fell to its lowest level in more than four years.

"Even if the loss in output due to the power cuts could be limited to 5- 10% of GDP it will be difficult to attain any growth in 2008," the chamber said.

Gold Fields, the world's fourth-largest gold producer, has warned that a 10% cut in power could mean a cut in production of up to 20%.

The government says the country is a victim of its own success, with unprecedented growth, and more than 3.5 million homes hooked up to the national grid since the African National Congress came into power in 1994.

However, it has also said it made mistakes and last month President Thabo Mbeki admitted officials should have heeded earlier advice to invest more in power generation.

The Energy White Paper of 1998 had encouraged independent power producers to enter the generation market, and warned that South Africa could run out of electricity by 2007.

This private sector investment did not emerge, deterred by cheap electricity due to massive coal reserves, so the government revised its policy and Eskom was finally given the go-ahead to build new power stations.

The government has been promoting green strategies to reduce demand including subsidies for solar-powered water heaters; a program to exchange high-wattage light bulbs for more efficient ones; solar power traffic lights, and smart meters in homes.

It has repeatedly insisted it will not allow the crisis to interfere with industrial projects, or with plans for hosting the FIFA 2010 World Cup.

After a meeting with Jacob Zuma, the head of the ANC, FIFA President Joseph Blatter said the event will not be affected by the power cuts, and South Africa is on track with its preparations.

Professor Kevin Bennet, director of the energy research centre at Cape Town University, says the generation problems are down to poor government planning, though he does not expect the recent power cuts to be a "long-term" situation.

Tony Twine, economist at South African consultancy Econometrix, said until some clarity emerges the electricity crisis will have a "debilitating" influence.

He says precise figures are not possible - "how do you quantify the economic impact of a two-hour traffic jam", but that psychological damage to economic wellbeing has taken a hit.