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2023-03-27 at 15:06 #398043Nat QuinnKeymaster
Despite the South African government’s showmanship around dealing with the country’s power crisis with “urgency”, in reality, its response has been incredibly slow.
This has left South Africa’s economy severely stunted, knocking the confidence levels of businesses, consumers and investors, says Investec chief economist Annabel Bishop.
The government has been making a great show of dealing with the crisis, from first unveiling the emergency ‘energy action plan’ when load shedding hit stage 6 in the middle of 2022, to declaring load shedding a national state of disaster and announcing a new minister of electricity during the president’s State of the Nation Address in February (who he appointed a month later).
The new minister, Kgosientsho Ramokgopa, has also been making a big show of being on the ground and actively dealing with the crisis.
He has been on a media roadshow for the past week, visiting every power station on Eskom’s coal fleet, ‘mending fences’ with workers, and downplaying things like fraud and corruption, which he says has little to nothing to do with the crisis.
Meanwhile, despite a recovery in Eskom’s performance – to the point that the embattled power utility can now actually suspend load shedding for a few hours on the weekend – the reality remains that South Africa’s energy situation hasn’t improved much, and the impact on the economy has been, and remains, devastating.
The South African Reserve Bank (SARB), national banks, investment firms and the International Monetary Fund (IMF) have all come out with damning projections for the country’s economy, which is teetering on the edge of recession.
According to Bishop, South Africa’s energy crisis is severely suppressing growth and job creation and shows little immediate likelihood of being resolved.
“South Africa is taking a very tardy approach to the resolution of its energy crisis, with no urgent plans for a substantial increase in the power supply in the short-term, and energy experts expect load shedding to persist daily this year, worsening over winter,” Bishop said.
The economist also noted the recent decision by parliament to reject investigating allegations of corruption at Eskom from its former chief executive, Andre de Ruyter.
“The lack of urgent investigation of whistleblowers’ claims of high levels of corruption and corruption-linked vandalism need to be addressed, and unnecessary breakdowns halted, while a strong repair and maintenance programme is needed.”
The economist noted that the new build of infrastructure takes a number of years, and is being inhibited by the reduction in the size of the construction industry, which shrank under the Covid-19 lockdowns on the economy that ceased business operations in the sector.
“The deteriorating state and insufficiency of electricity transmission is also a limitation on energy projects,” she said.
While South Africa’s economic prospects are tied to more than just the level of load shedding, Bishop said factors like the upwards interest rate hike cycle have had a negligible impact on growth compared to the loss of productive capacity from the insufficient electricity supply, she said.
Citing the IMF’s latest statements on South Africa, Bishop noted that the country is being hit on all sides – energy supply, human capital constraints, collapsing infrastructure, policy fumbling, crime and corruption – and everything is underpinned by the state moving at a snail’s pace to do anything about it.
The IMF also pointed to this as one of the biggest risks for South Africa, noting “delays in addressing the energy crisis and Eskom’s and Transnet’s operational and financial weaknesses, slower-than-expected progress or reversal in reforms and policies, including fiscal consolidation, and increased political uncertainty” as key risks for the country.
Bishop joined other commentators by cutting South Africa’s growth prospects for the year to just 0.2%.
“The first quarter of 2023 is likely to see economic activity contract further, by -0.5% from Q4.22’s -1.3%, which will yield a recession on a technical basis as load shedding cuts into productive capacity,” she said.
source:No urgency from government to end load shedding: economist (businesstech.co.za)
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