There is a ”very real” risk that South Africa could face an economic recession as a result of the current electricity crisis, the South African Chamber of Commerce and Industry (Sacci) said on Wednesday.
”We have already been going through an economic slowdown; this [the electricity crisis] could push us into a recession,” Sacci economist Richard Downing said.
He said it was ”quite possible” that the country could only achieve a growth figure of 1% to 2%t this year.
”The possibility for growth to 1% seems quite possible, instead of around 5% that people were talking about,” said Downing.
Downing said he based his predictions on the loss of production time resulting from the power cuts.
He said that as the power cuts had become regular occurrences, the production time loss and the work needed to be done by businesses in that time could never be recovered.
”It is apparent that the shortage of electricity does pose a severe threat to the production capacity of goods and services, since critical production time is lost due to electricity power shortages during working hours.
”Even if the loss in output could be limited to 5% to 10% of gross domestic product, it would be difficult to attain any growth in the economy in 2008.”
Downing said the effects of the electricity crisis had not been fully captured in the current Business Confidence Index (BCI) for January 2008.
He said the effects would only be noticeable in the next three to four months.
The BCI for January 2008 released by Sacci on Wednesday measured 93,8 — after it declined to 94,8 in December 2007.
Sacci chief executive Kwandi Kondlo said of utmost importance was how the electricity crisis was dealt with practically over the next six months.
”If we do not manage the current electricity crisis properly … if our short-term initiatives are not workable, we are heading for a situation whereby we will see our economy go through a major slowdown,” said Kondlo.
”Actions speak louder than words and business investors will be sensitive on how the dilemma is handled in the short term and for possible solutions to address the dilemma in the long term,” said Downing.
”In the meantime, business confidence will remain under pressure,” he said.
Sacci was formerly the South African Chamber of Business (Sacob).
Negative impact
On Tuesday, Minerals and Energy Minister Buyelwa Sonjica said permanent solutions to South Africa’s energy crisis are being sought.
”I concede that this situation impacts negatively on planned output of the country’s mining operations,” Sonjica said at a mining indaba.
Urging all mining companies to continue honouring their commitments to be energy efficient and innovative in conserving energy at their operations while the government ”persists in securing adequate supply in the medium term”, Sonjica blamed the recent energy shortages on the unprecedented demand at the hands of faster-than-expected economic growth.
Companies operating mines in South Africa have committed to use 10% less electricity after their mines were effectively shut down by lack of electricity last month.
South African mines consume about 15% of the electricity South African power utility Eskom produces.
The South African government released its national response plan last week. The plan deals with the mandatory provisions, incentives and support programmes that will be introduced to increase energy efficiency, said Sonjica.
”This will allow for economic growth to continue on the basis of efficiency in the short and medium term while we increase our reserve margin by bringing on stream new capacity in the long term,” she said.
While Eskom’s mothballed power stations will be re-commissioned to tackle the problem in the medium term, Sonjica said it was clear that ”we need to strive towards the timeous development of projects” that provide the country with integrated power and energy solutions. — Sapa, I-Net Bridge