15,300 GWh was lost to load-shedding in the first half of 2023. This is 30% worse than in all of 2022 and more than all the load-shedding implemented in the 15-year period between the first incident of load-shedding in 2007 and the end of 2021.
This was revealed in Absa’s recently released South Africa Q3 2023 Quarterly Perspectives.
While Absa revised its 2023 GDP growth outlook upwards to 0.7%, it said the local economy has been hobbled by a series of adverse domestic supply shocks this year.
“These include disruptions to rail and port operations, weather events and, of course, ongoing electricity shortages.”
These circumstances have resulted in highly volatile economic activity levels, with quarterly GDP shrinking in 3 of the last 7 quarters.
More recently, the dramatic escalation in the intensity and frequency of load-shedding, particularly from the second half of last year, has been the primary risk to economic activity.
However, despite the scale of the electricity supply challenge in H1 2023, South Africa’s economy has shown remarkable resilience, the bank said.
GDP expanded by 0.4% quarter-on-quarter in Q1 2023. At the start of this year, the consensus expectation was for zero growth in Q1.
Absa said the resilience of the first quarter appears to have carried into Q2 2023. While data is a little more mixed than in Q1, it broadly points to yet another quarter of positive GDP growth.
The bank forecasts GDP growth of 0.3% quarter-on-quarter for Q2.
However, despite the apparent resilience of economic activity in H1, South Africa’s growth outlook remains subdued and clouded with uncertainty, mainly due to the country’s electricity crisis.
“The electricity supply constraint persists with its hard-to-quantify effects on the economy, particularly on smaller businesses, and on sentiment more broadly,” Absa said.
On electricity, Eskom appears to have made some progress regarding plant breakdowns, which, combined with the scaling back of planned maintenance and lower-than-usual demand, resulted in June 2023 witnessing the lowest monthly load-shedding since August last year.
In June, Eskom’s Energy Availability Factor was also at its highest level this period, but it weakened again in July.
Absa said Eskom’s generation remains highly vulnerable and prone to breakdowns, and until the utility can return some of its generating units that are on long-term maintenance, bouts of load-shedding may continue in the near term.
However, energy is only one part of South Africa’s growth-sapping infrastructure deficit, Absa said.
“We believe mounting problems with South Africa’s rail networks and ports will continue to weigh on the competitiveness and volumes of various exporting sectors, particularly bulk commodity exporters, with knock-on effects on jobs, taxes and FX reserves.”
“Meanwhile, localised water unavailability has also manifested, especially in Gauteng, and municipal service delivery, in general, continues to deteriorate.”
According to Absa, all these challenges are likely contributing to the ongoing weakness in private-sector business confidence.
The BER Business Confidence Index fell for the fifth consecutive quarter to just 27 points in Q2 2023.
Without a sustained improvement in business confidence, a broader recovery in private sector investment spending outside energy projects will be slow.
Given this low business confidence, Absa believes private sector investment spending will only return to pre-pandemic levels in Q2 2025.