By Staff Reporters

Load-shedding is wreaking havoc in the country’s economy with daily losses estimated at just over R4 billion. Experts fear it may get worse and subsequently push the country further into recession.
Bloomberg says the South African economy has shrunk in the final quarter of 2022 and this trend will continue for the three months through March.

“Statistics agency data showed mining and manufacturing output, which makes up about a fifth of total gross domestic product, declined in the December quarter. South Africa’s economy is increasingly vulnerable to a recession in the next 12 months, with an ongoing electricity crisis seen further curbing activity,” Bloomberg reported. According to the Bloomberg report, this places the country on the probability of a recession at 68%, up from odds of 45% in January. This prediction comes after Eskom announced that rolling blackouts are likely to persist for at least two more years as the state-owned power utility overhauls its ageing, mostly coal-fired plants. “One solution that can permanently deal with load shedding is to fix Eskom as soon as possible,” Kganki Matabane, BBC’s CEO, told Al Jazeera, saying other proposed solutions like utilising independent power producers and solar energy were like “putting a bandage on a broken arm”.

“In South Africa, we have an installed capacity of 47,000MW … but we are only using 26,000MW at the peak. So, it’s like you have a house with four rooms, but you can only use one room. So for us, the easiest solution is to first fix the rooms in the house. We want the government to put all its efforts into fixing Eskom, we believe we can reduce the load shedding from Stage 6 to Stage 4,” said Matabane.
South Africa experienced more load-shedding in one month (January 2023 — 29 days of load-shedding) than in 12 months in 2019 where there were 22 days of load-shedding.

According to data from the popular South African load-shedding tracking and monitoring App, ESP.info, there were 35 days of load-shedding in 2020. The CEO Mikel Mabasa of the National Association of Automobile Manufacturers of South Africa (NAAMSA), the situation was unfortunate as the industry was severely affected.

“Unfortunately, it looks like load-shedding will be with us for the next few years. South Africa urgently needs new generation capacity to plug the gap ASAP. South Africa’s auto sector is huge and is a key contributor to the South African economy.

“Companies and organisations involved in the design, development, manufacturing, marketing, importation, exportation, and selling of motor vehicles help employ over 100,000 people in South Africa.
“It is one of the country’s largest economic sectors by revenue and contributes 4.3% to the country’s GDP (2.4% manufacturing and 1.9% retail). The industry accounts for 17.3% of the country’s manufacturing output and is the country’s 5th largest exporting sector out of all 104 sectors and accounts for 18.1% of the total expo,” explained Mabasa.

Small Businesses

Small businesses will be hardest hit as the economy takes this huge knock as a result of load shedding, according to a blog written by Marc Bromhall in smesouthafrica.co.za.
“When looking at how load-shedding affects small businesses, one of the main issues is a loss of production. All kinds of businesses and industries require electricity to produce their products and services. This can include businesses in manufacturing, services that use
electrical equipment (like auto mechanics), restaurants, and more,” wrote Bromhall.

It says losing electrical supplies results in a pause in the day’s work. This could mean a significant loss of business, not being able to fulfil orders or customer requests, or producing product shortages.  
“Small businesses have endless challenges that they need to face each day, and load-shedding can be one of the worst. It forces businesses to close for a large portion of the day. This has many repercussions, all of which result in impacted revenue and profits,” said Bromhall.

These same fears are shared by FNB senior economist Thanda Sithole who told BusinessTech he expects South Africa to suffer through at least 250 days of load shedding in 2023, predominantly at stage 4.
“This is significantly higher than expectations from the South African Reserve Bank (SARB), which projected 200 days of outages at its Monetary Policy Committee briefing in January.
“The 200 days of expected load shedding was a key factor in the SARB cutting South Africa’s GDP growth prospects for the year to just 0.3%. If the number of actual days exceeds this outlook, chances are the wider economy will undershoot that target as well,” Sithole told BusinessTech.

Darker days for economic growth

South Africa has already experienced over 40 days of load shedding in 2023 – every single day since the start of the new year – and has been in a state of near-permanent load shedding since September 2022.
Energy experts have pointed to load shedding in 2023 as being just as bad as in 2022, where the country experienced 207 days of outages, but with no end to the energy crisis on the horizon, analysts are constantly adjusting their predictions.

While Eskom and the national government have spurred some hope that grid relief will be coming by the middle of the year, it is generally accepted that load shedding will be a regular feature in the country for the next 18 months. Ratings agency Moody’s Investors Service has issued a warning that South Africa’s economic growth could slump below 1% in 2023 due to the ongoing severe power.

Moody’s vice-president senior credit officer, Aurelien Mali, warned that the country’s gross domestic product (GDP) was now likely to track below their previously downward growth forecast of 1% in 2023.
He told Independent Online this outcome would be significantly lower than the National Treasury’s downwardly revised growth forecast of 1.6% and the 1.1% growth earmarked by the SA Reserve Bank in 2023. Mali said the multiple breakdowns at Eskom’s power stations responsible for record levels of load shedding were going to endure and cripple any marked activity this year.