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World Bank cuts down South Africa's GDP forecast over Eskom crisis

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  • The debt-laden power utility, described by Goldman Sachs Group Inc. as the biggest threat to South Africa’s economy, put the country at risk of a second recession in as many years after it implemented the most severe power cuts to date in December. Gross domestic product growth likely slowed to 0.4% in 2019, the World Bank said.

The World Bank is the first key institution to cut its economic growth forecast for South Africa to below 1% for 2020 due to electricity supply concerns.

It now expects the economy to expand by 0.9% this year, the Washington-based lender said Wednesday in its Global Economic Prospects report. That compares with an estimate of 1% in its Africa Pulse report released in October and is well below government forecasts.

Its outlook for Africa’s most-industrialized economy is “markedly weaker” because it sees electricity supply and infrastructure constraints inhibiting domestic growth with weaker global economic conditions weighing on export demand.

The bank’s revision comes as Eskom Holdings SOC Ltd., which generates about 95% of the country’s electricity, resumes rolling blackouts earlier than expected. The power cuts threaten to drag on an economy stuck in the longest downward cycle since 1945 and that hasn’t expanded by more than 2% annually since 2013.

The debt-laden power utility, described by Goldman Sachs Group Inc. as the biggest threat to South Africa’s economy, put the country at risk of a second recession in as many years after it implemented the most severe power cuts to date in December. Gross domestic product growth likely slowed to 0.4% in 2019, the World Bank said.

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The World Bank sees GDP growth averaging 1.4% in 2021-22 if President Cyril Ramaphosa’s administration is able to ramp up structural reforms and address policy uncertainty, and if there’s a recovery in public and private sector investment.

Enforced electricity cuts have been imposed, effective from 8am on Thursday to 6am on Friday.

This follows two nights of stage two load-shedding. Thursday’s outage is also at stage two.

The system is “severely constrained and unpredictable.”

Eskom is appealing to South Africans to practise a no-waste approach to electricity by, among other power-saving measures, switching off appliances at the wall plug when not in use, as well as geysers, pool pumps and air conditioning units.

“We ask customers to reduce demand by using electricity sparingly as a concerted collective effort can help to avoid or reduce the level of load-shedding,” the utility said.

Eskom said it has lost additional capacity overnight with breakdowns of more than 14,000MW.

“Our emergency reserves are also insufficient to meet the demands during the day. As a result, we have to load-shed throughout the day, until tomorrow.

“Our teams continue to work tirelessly to return units from planned and unplanned outages.  

“We will give South Africans regular updates about our prognosis for tomorrow and our recovery efforts for the rest of the week leading into the weekend.”

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Load-shedding is an essential and controlled measure to ensure that the integrity of the grid is not compromised, added Eskom. 

If you suspect COVID-19 infection or wish to obtain more information on this disease, please call the Ministry of Health and Child Care on toll free hotline number 2019 for assistance.

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Agencies: Sowetan, Bloomberg
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