South Africa’s current bout of intense rolling blackouts threatens to further weigh on economic activity, weaken business confidence and weigh on investment, according to Absa Group Ltd.
(Bloomberg) — South Africa’s current bout of intense rolling blackouts threatens to further weigh on economic activity, weaken business confidence and weigh on investment, according to Absa Group Ltd.
While state-owned power utility Eskom Holdings SOC Ltd. has implemented outages in Africa’s most-industrialized economy for almost two decades, it has for the past seven days subjected the country to record blackouts — as much as 12 hours a day — to protect the power grid from collapse as its aging, mostly coal-fired power plants fail. Short-term solutions to alleviate the crisis have yet to be announced.
“I don’t know and I don’t think Eskom knows how quickly they’re going to be able to sustainably scale back loadshedding from Stage 6,” said Peter Worthington, a senior economist at the Johannesburg-based lender, referring to the outages in which 6,000 megawatts of power is removed from the grid.
Blackouts over the holiday period from mid-December to early January, when electricity demand eases, shows the strain on the grid, he said. How much of the outages are due to active sabotage, a cluster of simultaneous bad-luck events, or “deeply entrenched system problems” at the company — where maintenance over the past decade has been patchy — is unknown, Worthington said.
Each quarterly decline of 1% in electricity consumption is associated with a 0.16% decrease in gross domestic product growth, according to Absa’s research. The economy is unlikely to expand by more than 0.3% quarter-on-quarter through 2023, according to a Bloomberg survey of economists that also sees a 45% chance of the economy slipping into recession.
Power cuts likely shaved 1.3 percentage points off economic growth in 2022, when the nation endured a record 205 days of rationing, Worthington said. Modeling based on historic data doesn’t account for companies having back-up power supply or retooling production processes to deal with outages, and cumulative damage to the economy’s growth potential from investment lost due to persistent power rationing, he said.
South Africa’s statistics office is considering including self-generated power in its monthly electricity-generation data.
–With assistance from Rene Vollgraaff.
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