News

South Africa’s Economy in Peril: Shocking 20% Loss Due to Relentless Power Cuts

Published by
WIlliam Dube

Continuous power cuts resulting from load shedding have significantly impacted South Africa’s economy, decreasing its potential size by almost one-fifth since the practice began around 2008, as reported by an energy expert at the continent’s largest fund manager.

  1. South Africa’s economy has suffered a significant loss of almost 20% in potential growth due to continuous power cuts resulting from load shedding since 2008.
  2. Energy specialist Lungile Mashele warns that the ongoing energy crisis, with weekly power outages expected in 2023, threatens the country’s economic growth prospects.
  3. The crisis has far-reaching consequences, impacting industries such as mining, telecommunications, and public health, further emphasizing the need for urgent solutions to address the energy problem and support economic development.

Weekly Outages Expected in 2023: Threatening Economic Growth

Lungile Mashele, a sector specialist for energy and infrastructure at the Public Investment Corp. (PIC), expressed concerns about the future of the country’s economic growth during a conference in Johannesburg on Thursday. According to Mashele, South Africans can expect power outages every week throughout 2023, and unless the inadequate electricity generation situation is tackled, the economy’s growth prospects will be bleak.

State power utility Eskom has been struggling to keep up with electricity demand, resulting in rotational blackouts on more than 200 days in 2022 and nearly every day this year. Eskom’s outdated and poorly maintained facilities are a significant contributor to the problem. South Africa’s central bank estimates that the ongoing energy crisis will reduce economic growth by 2 percentage points this year.

Managing R2.55 trillion in assets, Mashele explains that power outages affect various aspects of daily life, ranging from the scheduling of surgeries and poultry processing to mining production volumes.

Missed Opportunities and Potential Consequences of the Energy Crisis

Mashele regrets the lack of focus on resolving energy problems in 2008, which would have placed South Africa in a much better position today. The expert warns that without a reliable power supply, the nation faces the risk of a complete shutdown of various sectors and industries.

In her presentation, Mashele highlighted some of the current and potential impacts of the ongoing crisis:

  • Marginal underground precious metal mines may be forced to close, resulting in reduced export earnings and job losses.
  • The quality and availability of the telecommunication network have been compromised. Vodacom Group has spent over R2 billion on batteries, while MTN Group has deployed more than 2,000 generators and consumes over 450,000 liters of diesel per month.
  • Power outages are causing sewage spills, posing significant environmental and public health risks.
  • Insurance claims related to blackouts have surged by 250% over the past year.
  • The International Monetary Fund (IMF) announced on Wednesday that it has lowered its economic growth forecast for South Africa for this year to 0.1% from 1.2%, primarily due to persistent power outages.

South Africa’s Growth Crisis

Annabel Bishop, chief economist at Investec Bank, echoed Mashele’s concerns at the same conference, stating, “We really are in a crisis from a growth perspective.”

To prevent further damage to the nation’s economy and ensure a sustainable future, it is crucial for the South African government and private sector to collaborate on addressing the energy crisis. Investing in alternative energy sources, upgrading existing infrastructure, and implementing better maintenance practices can contribute to securing a stable and reliable power supply, ultimately supporting economic growth and development.

WIlliam Dube

William Dube is a finance and economic news expert with over 10 years of experience in economic anaylsis, financial product assessment and market analysis. With a numerous certificates from prestigious universities including but not limited to Yale University and the University of Pennyslivenia. William specializes in providing insightful news developments in South Africa and commentary on investment strategies, risk management, and global economic trends. You can contact him on william@rateweb.co.za

Share
Published by
WIlliam Dube

Recent Posts

Tesla Unveils Refreshed Model 3 in North America with Exciting Upgrades

Model 3 Refresh: Tesla introduces a restyled Model 3 in North America, featuring a rear…

January 11, 2024

SEC Twitter Account Compromised, False Bitcoin ETF Approval Post Triggers Market Volatility

Unidentified individual accessed SEC's Twitter through a third party. Lack of two-factor authentication heightened vulnerability.…

January 11, 2024

Global Currency Markets Navigate Economic Uncertainties: Yen Weakens, Dollar Awaits U.S. Inflation Data

Japanese yen falls against the dollar and euro due to persistently shrinking real wages for…

January 11, 2024

Oil Prices Unmoved as Unexpected U.S. Inventory Build Raises Concerns

Unexpected Inventory Build: U.S. crude inventories unexpectedly grew, sparking concerns about weakening fuel demand and…

January 11, 2024

YanGuFang International Group Appoints Interim Executives Amidst CEO and CFO Detainment

Leadership Shake-up: CEO and CFO of YanGuFang International Group detained by Shanghai Police, prompting interim…

January 11, 2024

Cryptocurrency Market Analysis: SHIB, SOL, and ETH Navigate Challenging Terrain

SHIB breaches 200-day EMA, signaling bearish sentiment. Historical data suggests strong buyer reactions and potential…

January 11, 2024