Good news about load-shedding and economic growth in South Africa

Hugo Pienaar

Hugo Pienaar, chief economist at the Minerals Council South Africa, said the positive impact of no load-shedding will be seen in the country’s second-quarter economic data.

Eskom has suspended load-shedding for over 100 days. It credited enhancing the reliability and performance of its coal generation fleet.

The last time Eskom could suspend load-shedding for such an extended period dates back to the period between 23 July 2021 and 06 October 2021.

“Our operational efficiency continues to exceed expectations, with current unplanned outages still averaging 12,000 MW, well below the winter forecast,” Eskom said.

More positive news was that Eskom announced the successful transfer of Unit 5 of the Kusile power station to operations in the generation division.

This 800 MW unit will now contribute power to the national grid, increasing Kusile Power Station’s total output to 4,000 MW.

A lack of reliable power has been one of the biggest constraints to economic growth in South Africa.

The South African Reserve Bank said the intensity of load-shedding directly impacts the country’s real GDP growth.

It said all of the economic subsectors in South Africa displayed a negative correlation to the intensity of load-shedding.

Eskom’s load-shedding reprieve is, therefore, good news for the business sector and the economy.

Pienaar said the positive impact of no load-shedding in South Africa will be scattered all over Q2 2024 gross domestic product (GDP) data.

The South African Revenue Service (SARS) data shows that imports of petroleum oils—diesel and gasoline—were down by R884 million, or 6.3% year-on-year, from April to May 2024.

However, the positive impact of uninterrupted power on the economy will be diluted by non-power constraints.

“These include sustained poor consumer spending dynamics and ongoing logistic constraints that inhibit exports,” Pienaar said.

He said the second half of 2024 will be interesting to watch as there are positive signs which can have a big influence on the economy.

These include the sustained absence of load-shedding, a further leg lower in CPI inflation, and if policy discussions in the new government are concluded without major drama.

Investec chief economist, Annabel Bishop

Investec chief economist Annabel Bishop is cautious about expecting too much from the South African economy this year.

She said the third quarter is at risk of load-shedding as the winter months see higher electricity demand.

Eskom stated that the winter forecast is still “for unplanned outages at 15,500 MW and load-shedding limited to Stage 2”.

She added that the DA lacks a portfolio with economic heft in President Cyril Ramaphosa’s new cabinet. The DA holds six ministries and the ANC twenty.

“The ANC holds on to the ministries of trade and industry, mineral resources, small business development and the presidency,” she said.

The ANC also retained the planning, monitoring, and evaluation, as well as finance, electricity, energy, and water ministries.

Transnet continues to underperform heavily relative to the economy’s needs. Port congestion and insufficient and deteriorated rail transport capacity hurt economic growth.

The ANC retained the management of the transport ministry, which limits the chances of rapid reforms.

While the DA has agriculture, forestry, fisheries and the environment, tourism, and communications, it comprises a small part of the country’s GDP.

“The industries where policy changes need to occur are in trade and industry, along with mineral and petroleum resources, particularly exploration, to boost economic growth,” she said.

With these factors in mind, Invested forecasts economic growth of 1.0% this year, slightly down from its previous 1.1%.

This revision was done because of revisions to historical data and a poor first quarter. However, it continues to forecast growth approaching 3.0% by 2029.


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