Current Load Shedding Likely To Cost South Africa ZAR 2 Bn A Day

Estimations by different energy analysts earlier indicated that stage 2 load shedding of 2,000MW could cost the South Africa ZAR 2 Bn a day.

The country has once again experienced load shedding. On Wednesday Eskom implemented a stage two load shedding and the power utility warned it could continue for the next week.

The load shedding has come as a big blow for the economy especially given that the current tough economic times the country is facing. The load shedding will hamper the country’s growth prospects since the economy has not even fully recovered from a contraction in Q1.

The rolling power cuts in the first quarter of 2019 took a toll on the economy of the South African country leading to an economic contraction of 3.1 percent.

South Africa’s economy made an unforeseen strong rebound in Q2, this was partly due to a stable power supply during the period. While the country managed to bounce back with stronger GDP growth, experts stated that the growth was not the start of a stronger cycle but a return to normalcy following a weak start in the first quarter.

The load shedding has come at a critical time when the country is striving to attract potential investors assuring them of the country’s growth prospects following weeks of xenophobic attacks that lowered investor confidence.

Renown South African economist Mike Schussler has cautioned that if the load shedding extends for over a week, it will start to drag SA’s growth to 0 percent for the year.

Eskom has repeatedly been cited by rating agencies as one of the main threats to South Africa’s investment-grade credit rating status and economic growth prospects.

The power utility has a debt of ZAR 450 Bn and for the year ending March 2019, it suffered a loss of ZAR 20.7 Bn. The utility’s crippled financial and operational condition has continued to pose a huge threat to South Africa’s economic prospects.

Notably, the World Bank recently lowered the economic growth forecast for South Africa for 2019. The international financial institution cited policy uncertainty, low investor sentiment Eskom woes for the downward revision.

“These large downward revisions reflect the sharp slowdown in real GDP growth in the first quarter of 2019, low investor sentiment, and persisting policy uncertainty, including whether a solution could be found for Eskom, fiscal slippages would be averted, and structural reforms would be undertaken,” it said.

Featured Image Courtesy: Waldo Swiegers/Bloomberg