The effects of load shedding on the South African economy will be laid bare as Statistics South Africa is set to announce the gross domestic product (GDP) figures on Tuesday.
Supported by a weakening rand, inflation on the up, interest rates also on a relentless rise, and a cost of living crisis for consumers, the rolling power cuts pave the path for the country’s GDP to contract once again, taking it well into recession territory.
This comes after South Africa’s growth contracted by 1.3% quarter-on-quarter in the last three months of 2022.
The decline in growth over the quarter was largely broad-based, with only the transport, construction and personal services sectors increasing over the quarter.
FNB senior economist Mamello Matikinca-Ngwenya on Friday said the economy could have experienced a “mild recession” during the first three months of this year.
Matikinca-Ngwenya said the volatile agricultural sector and unknown variations in some private services sectors remained a risk to the first quarter GDP outcome.
“Against this background and considering upcoming GDP revisions, we maintain our view of a mild recession in the first quarter,” she said.
The outlook for South Africa continues to remain gloomy while the rest of the continent, at large, steams ahead towards sunnier skies.
The African Development Bank (AfDB) said last month that Africa’s economic growth is set to edge upwards in 2023 and 2024, while closer to home, South Africa’s economy is about to nosedive.
Frank Blackmore, lead economist at KPMG, told Business Report that GDP has a lot of uncertainty surrounding numbers.
“On the negative side, load shedding reducing economic potential of the economy and deterioration in infrastructure impacting movement and export of commodities and, as a result, the additional investments by private sector to try to continue operations under these conditions, which would be a positive as added investment in the economy. Consequently and taking various impacts into account, I expect GDP growth in Q1 to contract, but can’t be sure in a number,” he said.
BUSINESS REPORT