Politics and blackouts weigh on SA's growth prospects

South Africa’s economy won’t accelerate soon, even as government relaxes energy regulations.

- Mariam Isa

south Africa’s worsening power crisis has hobbled the economy, slashing growth last year to almost zero and quashing any prospect of a significant pick-up in 2020 given the time required to both fix the faults at Eskom’s aging coal-fired plants and to build new generation capacity.

Load-shedding was the worst on record for SA in 2019, costing the economy between R60bn and R120bn, and will mount over the next three years unless immediate action is taken to close the gap between supply and demand, the Council for Scientific and Industrial Research (CSIR) warned in a presentation on 21 January.

Businesses, economists and rating agencies say the operational difficulties at Eskom are now the biggest threat to the economy, eclipsing even the importance of resolving the embattled utility’s financial difficulties, which are the main reason for SA’s unsustainable debt burden.

“Eskom is going to cap growth going forward. If it can’t power a struggling economy or a stationary economy, it’s not going to be able to power a growing economy,” says Jacques Nel, chief economist for Southern and East Africa at NKC African Economics.

In January the International Monetary Fund, the World Bank, the Reserve Bank and independent forecasters all revised their growth forecasts for SA this year to below 1% – below the pace of population growth – and many have warned that power shortages could further reduce the outcome.

Economists point out that the future impact of this is hard to calculate because it is impossible to predict the frequency, timing, intensity, and duration of load-shedding, which Eskom implements to prevent a national blackout.