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Load shedding raises risk of second SA recession

Power cuts already hit the economy in Q1, when it contracted the most in a decade.
Darkness surrounds residential homes due to load shedding in Troyeville, Johannesburg. Image: Dean Hutton, Bloomberg
South Africa’s flagging economy could face a second recession in as many years due to a new wave of nationwide power cuts.

Eskom, the state-owned power utility seen by Goldman Sachs as the biggest threat to the country’s economy, started a fifth day of rolling blackouts on Monday due to further losses of generating capacity at its plants. While the power cuts are implemented to prevent a collapse of the electricity grid, they have a debilitating effect on the economy by curtailing mining activity and factory output and causing crippling traffic delays.

The latest round of so-called load shedding started two days after the statistics office announced that gross domestic product (GDP) shrank an annualised 0.6% in the three months through September. Power cuts already hit the economy in the first quarter, when it contracted the most in a decade, led by a drop in manufacturing, mining and agriculture output.

“As it is, the fourth quarter was going to be flat but now there’s a growing chance that it could be negative,” said Elize Kruger, a senior economist at NKC African Economics.

The one thing that could prevent GDP from dipping as deep as it did in the first quarter is the fact that many businesses are winding down as the Christmas holidays approach.

December is the “least damaging time to have load shedding” because the economy is geared more toward the services industry, with construction work and factory activity set to slow for the holiday break, said Dawie Roodt, chief economist at the Efficient Group.

Mining companies say they are probably bearing the full brunt of load shedding because they are among the heaviest users of electricity.

The world’s biggest platinum-group metals producers prioritise electricity allocation to underground mines and ensure workers’ safety while reducing power to smelters. Still, production may suffer as companies stockpile ore for processing later when there is sufficient power, Jana Marais, spokeswoman for Anglo American Platinum, said. Cutting power to smelters also adds to costs because the plants are designed to run continuously, she said.

Sibanye Gold, the country’s biggest private employer, has to reduce power use by 20% during load shedding, said spokesman James Wellsted.

“It’s concerning and if it continues for a long time it will impact on production and the entire industry, not to mention the economy,” Wellsted said.

Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.

© 2019 Bloomberg L.P.

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Anyone still wondering about the impact of load shedding on the ZA economy probably lives under a tree..

The shockingly worrying part is the “good news” spin-doctors can not find and good news left in ZA to make load shedding more palatable to people anymore.

It might go on for two years.
This is very very bad.

..best way to predict events in SA, is to look at the “mean average” for the African continent, for example most countries on continent grapple with reliable power supply.

We simply need to gauge the average hrs of power supply for African countries, and Bobs your Uncle….a fair indicator of where SA’ future power supply is heading.

How wena chris! This electriciteeeeee thing is diffiiiicuuullt man. It is all the fault of the imperialist pig and van Rieback. Soega man! As comrade Bob said…” you keep your Britain(electricity and everything western and progressive)…and i’ll keep my Zimbabwe. Same here in old SA…its not gonna get better.

Aye, I am really worried. I see SA sliding painfully for us the way of Argentina then Haiti, Syria, Venezuela, Zimbabwe and Somalia. Not nice.

If one talks to Zimbabweans in South Africa, they will tell you we are following in their footsteps.

As long as the ANC (& EFF) stay in office and keep pushing stuff such as EWC & NHI while looting SOE’s we’re doomed like Zimbabwe.

Zimbabweans are better off buying food in South Africa and driving it over the border, than sending money home, because the money doesn’t get to their families.

Tell me again (some of the blind people) how nothing will change once the South African Reserve Bank has been nationalised.

Again – since the last post was deleted.
We have been in a recession since 2008.
What we are seeing is the start of the 2nd Great Depression in SA.
Brace yourselves or get out !!
It is not going to end well.

…we get used to it, same way Zimbo’s accept challenges of daily life.

For the citizen holding dear an Afro-centric, tribalist view….it’s not a disaster / part of acceptance.

For the minority western, Euro-cenric citizens (incl. the wealthier, educated portion of African population) this is a disaster to what they hold dear. Will need to get off this 1912-ship.

Eskom is the single biggest threat to SARS/Treasury not achieving the state’s revenue collection targets.

Mr Kieswetter, is it possible to chat to your struggle comrades “across the passage” with Eskom’s leadership, and ask them to stop this nonsense? Otherwise, SARS will have to set the collection targets of a country’s economy being a shadow of its former self.

Let’s hope the size of Govt also becomes a shadow of its former self (as it that would happen!). Well them, we’re looking forward to a credit default.

…..watching a classic movie Airplane! 1980

It’s like witnessing the comedy of that movie in the RSA …in real time

…chaos, conundrum and buffoonery

I fear this is the black swan event that is going to push us past the point of no return. I hope I’m wrong but the idiotic, brainless communist cadres seem intent on wrecking the whole country. Every single decision they make takes us closer to the edge. It is truly tragic. Cry my beloved country.

Just read Prasa under administration, Eskom continues to threaten the economy to the point of a recession…and they, the ANC led government continue with BEE and the introduction of the NHP

Do they have any idea where our economy is heading with their ludicrous policies and how they have collectively destroyed a vibrant economy? Recession on the horizon, job losses, junk status amidst the ongoing theft yet they continue down the path of destruction…It’s as though they want this to happen. Where are you Squirrel? Why don’t we hear from you? Even your multi million rand buffalos are concerned.The ANC had the sympathy of the world pre ‘94..This country is now the laughing stock of the world..Our leadership is on pause, will someone please push the play button so they can jump into action?

Load-shedding is being orchestrated within ESKOM under the leadership from unions and by employees facing retrenchments.

Rhamoposa confirmed on 11 Dec that sabotage was a factor in load shedding.

Has anyone seen Cyrill the squirrel or is he still hiding up some tree !!!

In times like these we have more chance of finding Maddy Mcann than we have of finding our beloved president. Run Cyril run ……

End of comments.

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