BER chief economist Hugo Pienaar said severe load shedding has had a debilitating impact on broader industrial output since the year began. File picture: Dean Hutton/Bloomberg
THE BUREAU for Economic Research (BER) has warned that growth in South Africa will probably contract deeper in the second quarter of 2023 as intensified power cuts cripple activity, denting potential investment prospects.
Eskom on Monday confirmed that Stage 6 load shedding will continue to be implemented indefinitely, as the power utility fails to meet demand due to generation capacity constraints.
Breakdowns on Monday amounted to 17,325MW of generating capacity, with 5,457MW of generating capacity out of service for planned maintenance.
BER chief economist Hugo Pienaar said severe load shedding has had a debilitating impact on broader industrial output since the year began.
He said this will result in another decline of real gross domestic product (GDP) in the first quarter, as output in the primary sectors of manufacturing and mining had been disrupted.
Pienaar said the energy situation had also put a cloud over President Cyril Ramaphosa’s fifth investment conference last week, but had illustrated that the private sector continued to seek out opportunities to invest in the country, notwithstanding the many business constraints.
“Following a reprieve in the intensity of load shedding during prior weeks, power cuts were back in full force last week, denting the prospects for economic activity at the start of the second quarter,” Pienaar said.
“The power crisis is not singing from the same hymn sheet on the future of Eskom’s coal-powered stations. This incoherence is a predictable outcome of too many ministers being tasked with finding solutions for arguably SA’s biggest crisis,” he said.
Eskom’s heightened power cuts have resulted in widespread fears of a potentially looming grid collapse after reports that the utility implemented Stage 8 load shedding, without informing the country last week.
The power utility implemented power rationing of more than 7,000MW due to a high degree of load curtailment, a situation where energy intensive producers are requested to reduce their demand for electricity, ie to cut back on output.
The growth prospects for the South African economy in 2023 are bleak, after posting reasonable real GDP growth of 2% in 2022.
The International Monetary Fund has cut South Africa’s growth outlook for this year to just 0.1%, with only a modest recovery of 1.8% seen next year.
This is similar to the SA Reserve Bank’s forecast, and more pessimistic than what most private sector projections are showing.
Major constraints cited by economists include intense power cuts, logistical bottlenecks, as well as a risky global macro and geopolitical environment.
Old Mutual Wealth investment strategist Izak Odendaal said on Monday that load shedding was going to be a persistent feature for the rest of the year and beyond, with some days worse and some better.
Odendaal said the possibility of a grid collapse would be best answered by someone with an engineering background, but he thought it was unlikely since that is exactly what load shedding is meant to prevent.
“However, we cannot rule out higher stages of load shedding during the winter months. Demand usually spikes with the cold, and if we have unexpected breakdowns (or vandalism), we can quickly move to higher stages,” he warned.
“Load shedding remains the local economy’s single biggest headwind, though the logistics crisis seems to be gaining ground. The solution is not only government departments and agencies doing their job better, but also making space for the private sector to get involved.
“This is happening in the electricity sector, though it will still take time to ease load shedding. Organised crime is also taking an increased toll on business activity. If these issues are not urgently addressed, future investment conferences are going to be even more sombre and downbeat affairs,” Odendaal said.
– BUSINESS REPORT