Business

Torrential rains knock SA economy

Chris Spillane, Rene Vollgraaff

Weeks of rain in the north and east of the country will have an impact on infrastructure spend, construction revenues and even maize harvesting.

The government will likely need to reallocate funds to repair damage caused by the extreme weather. (Gallo)

Heavy rain in South Africa's capital, its neighbouring main financial hub of Johannesburg and in the east of the country may further damage an economy weakened by labour strikes, high unemployment and power outages.

Pretoria, the seat of government, is experiencing its wettest March for 17 years, while Johannesburg has in less than two weeks had more than double the usual average for the month, according to South African Weather Service.

That's led to flooding that's caused the deaths of at least 11 people, washed away shacks and opened up sinkholes on city roads.

"The flood damage is, in quite a number of ways, quite negative," Johan van den Heever, head of economic reviews and statistics at the nation's central bank, said at a briefing in Pretoria on Wednesday. "One can see great expenditures having to be incurred in the next couple of quarters, perhaps, to revive elements of the infrastructure which has fallen behind through this."

Downpours in South Africa's north-eastern provinces caused Eskom Holdings, the state-owned utility that generates 95% of the country's electricity, to declare an emergency and enforce rolling blackouts last week because wet coal affected production at power plants. The flood gates at the Vaal Dam, the nation's second biggest by area and situated south of Johannesburg, were opened for the first time in three years, the Department of Water Affairs said.

Moving money
Strikes at mines and car plants last year curbed growth in Africa's largest economy to 1.9% last year, the slowest pace since a 2009 recession.

The government will probably need to reallocate funds to repair damage caused by the extreme weather, Christie Viljoen, an economist at NKC Independent Economists, said by phone on Wednesday from Paarl, near Cape Town.

"For example, if they were going to build a road, they'll now use that money to repair a dam," Viljoen said. "This won’t lead to increased infrastructure spending, they'll just have to move around some money or stop maintenance in another areas to fix these things."

Johannesburg had 113mm of rain in the first 10 days of March, the weather service said by email. That compares with a long-term average of 101mm for the month.

Pretoria received 190mm, the most since 1997 when 383.1mm of rain fell over the whole month.

Certainly unusual
The rolling blackouts were the first in six years and caused stores and factories to shut, while flights were delayed. "We're not out of the woods yet, the rain continues," Eskom chief executive Brian Dames told reporters in Johannesburg two days ago.

The power utility isn't able to shield all of its coal, which is used to generate more than 80% of electricity, he said.

Lost revenue in the construction industry because of rain delays is estimated at R50-million to R100-million a day, according to Norman Milne, president of the South African Forum of Civil Engineering Contractors.

"It can certainly be considered unusual," he said in an emailed response to questions on Wednesday. "Limpopo, Gauteng, North West, Mpumalanga, [KwaZulu-Natal] and parts of the Free State have been particularly hard hit."

Network faults
Santam received claims from companies and individuals for damage to homes, buildings and vehicles, Fanus Coetzee, head of adjustment services, said in an email on Wednesday, without giving details.

Grain SA chief executive Jannie de Villiers said in an email floods will probably delay maize harvesting in the eastern Mpumalanga province. Telkom said while its facilities have stand-by generators that can operate for as long as eight hours, its network is struggling.

"Telkom has experienced an increased volume of network-related faults caused by the adverse weather conditions," the Pretoria-based company said in an emailed response to questions. "Flooding does cause faults but it also restricts workmen from accessing the fault zone, causing delays in repair times."

A downpour in December 2010 in the northern provinces led to the Orange River, the country's biggest, and the Vaal River, a tributary, overflowing and cutting short the annual raisin harvest in Northern Cape province. South Africa is the continent’s largest exporter of dried fruit. – Bloomberg

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