South Africa’s economic disaster

Energy expert Clyde Mallinson said load-shedding crushed South Africa’s economic growth and has made the country much poorer.

Mallinson said South Africa’s gross domestic product (GDP) is around 20% lower than it should be because of a lack of electricity supply since 2008.

The latest World Bank data shows South Africa’s GDP declined from $458 billion to $419 billion over the last decade.

Kenya’s GDP, in comparison, increased from $47 billion to $110 billion over the same period.

It shows that while Kenya’s economy grew 134% from 2011 to 2021, South Africa’s economy shrunk by 9%.

South Africa’s population increased from 52 million to 59 million over this period, which means citizens are now significantly poorer than ten years ago.

“We are going backwards. Load-shedding has wiped out a large chunk of our GDP since it started in 2008,” Mallinson said.

He highlighted that the cumulative effect of lost GDP means the country has far less economic activity going forward.

“The long-term effect of load-shedding on South Africa’s macro economy is horrendous. It has been devastating,” he said.

Mallison’s concerns about poor GDP growth are echoed by Lungile Mashele, sector specialist for energy and infrastructure at the Public Investment Corporation (PIC).

She said load-shedding reduced the potential size of South Africa’s economy by almost a fifth since being imposed around 2008.

Mashele, whose organisation manages R2.55 trillion, said outages are affecting everything from the timing of surgeries and the slaughtering of chickens to mining production volumes.

“If we had focused on our problems in 2008, the situation be a lot better today. No power, no electricity – everything shuts down,” she said.

The potential impact of increased load-shedding in future on South Africa’s economy can be disastrous.

Marginal underground precious metal mines may close, leading to lower export earnings and job losses.

Telecommunication network quality and availability have been affected, outages are leading to sewage spills, and insurance claims increased 250% over the last year.

The International Monetary Fund had reduced its economic growth forecast for South Africa for this year to 0.1% from 1.2%, largely because of the outages.

In March, the South African Reserve Bank (SARB) dropped its forecast down to 0.2% growth for 2023.

It said the supply-side performance of the economy remains “severely impaired” due to load-shedding and logistical constraints.