South Africa

Private sector responsible for economic growth

The resilience of South Africa’s economy comes down to the private sector, which has responded to Eskom’s failure by implementing its own power solutions.

This is according to PPS Investments portfolio manager Reza Hendrickse.

Hendrickse’s comments come after news that the South African economy grew more than expected in the second quarter of this year.

Stats SA reported last week that the economy expanded 0.6% in real terms, compared to 0.4% in the first quarter.

He said this is due to the private sector responding to Eskom’s failure by implementing its own power solutions, dampening load-shedding’s effect on growth.

Professor Anton Eberhard has estimated that as of June 2023, households and businesses have installed 4,412 MW of rooftop solar.

According to law firm Cliffe Dekker Hofmeyr, this is double the capacity of Eskom under its four previous REIPPPs and nearly a 350% increase in the installed capacity by households and businesses since March 2022.

In addition to the private sector’s investment in alternative energy sources, the electricity headwind should have an even smaller impact on growth next year, Hendrickse said.

“Although 1.6% year-on-year growth is nothing to celebrate, the South African economy appears to be holding up reasonably well, considering our electricity situation and the fact that higher interest rates and inflation have left consumers with less disposable income,” he said.

Despite the better-than-expected GDP outcome, Hendrickse expects economic growth to remain constrained in the future, particularly in the year’s second half.

“Load-shedding is still a major constraint, which may be more evident in the third-quarter growth stats, where the colder months tend to give rise to higher electricity demand, placing additional strain on the grid.”

In addition, there may be other challenges to contend with, such as a potential US recession.

Solution to unemployment

Finance Minister Enoch Godongwana has also said that the private sector is the solution to South Africa’s high unemployment as it employs most South Africans.

Godongwana was speaking at News24’s On The Record Summit, which took place in August.

South Africa’s unemployment rate has improved slightly in 2023 to 32.6% at the end of the second quarter.

However, the number is still shockingly high, with 7.9 million South Africans unemployed and 13.3 million economically inactive.

According to the expanded definition, the unemployment rate is 42.1%.

Godongwana said the solution to this problem can only be found in the private sector – not the government.

“I went to one province, and I found people counting how many people each department is going to deploy. That is their concept of job creation. My sense is that the majority of people that are employed in South Africa are employed by the private sector.”

Godongwana said the government’s role is to create a conducive environment for the private sector to create jobs.


Top JSE indices