Economic effects of load-shedding hit home

The shock of Eskom’s load shedding has finally hit home, even as the China and terms-of-trade shocks are only starting to build, said Nomura analyst and emerging markets economist Peter Attard Montalto.

While Eskom has not enforced load-shedding for the past 17 days, the 99 days of load-shedding it has implemented in 2015 so far has caused manufacturing and mining output to decrease, Stats SA figures show.

Montalto said Africa’s most industrialised country, whose gross domestic product (GDP) contracted by 1.3% in the second quarter of 2015, was behaving economically “like it had lost a major industry”.

“This is the impact of Eskom load-shedding,” he said.

Eskom’s expenditure breakdown, which will be published in September, will show the impact it had on the domestic private-sector investment, real rates and inventories and if it was felt through the whole economy, said Montalto.

Severe stress
Turning to agriculture, Montalto said the shock to the sector was particularly large because the drought in some areas of the country had spilt over from the first quarter, with the intensifying impact of a second quarter of poor harvests.

The mining industry reflected severe stress, which will eventually “filter through to conflict with the government and eventual substantial job losses from some mineral industries”, said Montalto.

The fact that finance – and business services – remained the strongest sector was a key signal “that the low-job multiplier, highly skilled jobs sectors do fine in South Africa with an almost separate ‘doing business’ bubble in that area versus manual and unskilled industries not able to perform”.

This, Montalto said, is fundamentally the wrong way round for solving the country’s jobs crisis.

He said the weaker rand, currency volatility and in turn food prices will keep the Reserve Bank ready to hike in September, although the probability has fallen slightly to 60% from 65%.

Montalto downgraded his growth forecast for the year to 1.6% from 1.9%, for 2016 to 2.1% from 2.3% and 2017 to 2.6% from 2.8%. Although he expects a recovery in the eurozone and the US to affect the domestic economy, he said South Africa would not take proper advantage of rand weakness to boost net exports.

Montalto said “wage increases over productivity and the inflating away of any competitiveness that could be gained, and sluggish foreign direct investment in recent years” will all play a part in this.

Risks likely to have a negative effect on growth in 2015 and 2016 include strike action and future global shocks to come, although these are difficult to factor in, said Montalto.

Two factors that could reduce the forecast further are intensified load-shedding and a strike in the gold sector towards the end of the year.

“South Africa is having serious growth issues in what was meant to be an ‘OK’ quarter. The national treasury understands this, even the ANC understands this. However, it and the government are unable or unwilling politically to take difficult measures to correct it,” said Montalto. – News24.com

Advertisting

‘There were no marks on his neck’, Neil Aggett inquest...

The trade unionist’s partner at the time he was detained at John Vorster Square says she now believes his death was not a suicide

The death of Enoch Mpianzi at Parktown Boys is a...

Ignore the language used in brochures and on open days and be vigilant about the details

Study unpacks the ‘hidden racism’ at Stellenbosch

Students say they feel unseen and unheard at the university because of their skin colour

Ramaphosa enters the fray in fight between Gordhan and Mkhwebane

The president said his court case is “unfortunate” and a “measure of last resort”
Advertising

Press Releases

MTN unveils TikTok bundles

Customised MTN TikTok data bundles are available to all prepaid customers on *136*2#.

Marketers need to reinvent themselves

Marketing is an exciting discipline, offering the perfect fit for individuals who are equally interested in business, human dynamics and strategic thinking. But the...

Upskill yourself to land your dream job in 2020

If you received admission to an IIE Higher Certificate qualification, once you have graduated, you can articulate to an IIE Diploma and then IIE Bachelor's degree at IIE Rosebank College.

South Africans unsure of what to expect in 2020

Almost half (49%) of South Africans, 15 years and older, agree or strongly agree that they view 2020 with optimism.

KZN teacher educators jet off to Columbia University

A group of academics were selected as participants of the programme focused on PhD completion, mobility, supervision capacity development and the generation of high-impact research.

New-style star accretion bursts dazzle astronomers

Associate Professor James O Chibueze and Dr SP van den Heever are part of an international team of astronomers studying the G358-MM1 high-mass protostar.

2020 risk outlook: Use GRC to build resilience

GRC activities can be used profitably to develop an integrated risk picture and response, says ContinuitySA.

MTN voted best mobile network

An independent report found MTN to be the best mobile network in SA in the fourth quarter of 2019.