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South Africa power crisis has ‘severe’ GDP effects, World Bank says

The power rationing will probably restrict growth in gross domestic product to 2% this year.

South Africa’s electricity crisis has “very severe” implications for growth prospects in the continent’s second-largest economy, according to the World Bank.

The “power shortage in South Africa is of great concern,” Francisco Ferreira, the World Bank’s chief economist for Africa, told reporters via video-link from Washington on Monday. The lender is monitoring the situation closely, he said.

Eskom, the state-owned utility that supplies 95% of South Africa’s electricity, has implemented rolling blackouts this year as planned and unplanned maintenance at plants reduced generating capacity. Construction on two new power plants have faced several delays. The power rationing will probably restrict growth in gross domestic product to 2% this year, according to the World Bank, in line with the government’s forecasts.

“We hope bringing in the power plants into the grid will bring about some relief,” he said. “There is a need for better management of Eskom’s assets going forward.”

South Africa’s economy expanded 1.5% last year, the slowest pace since the 2009 recession. Dawie Roodt, chief economist of Efficient Group Ltd. in Pretoria, estimates the electricity crunch since 2007 has cost the economy more than 300 billion rand ($24.7 billion) in lost output.

Sluggish growth in South Africa and a slump in commodity prices will restrict GDP expansion in Sub-Saharan Africa to 4% this year from 4.5% in 2014, the World Bank said.

©2015 Bloomberg News

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