Reserve Bank Governor Lesetja Kganyago has detailed some of the biggest risks facing South Africa right now, including the threat of more Covid-19 waves and the recent unrest.
In a presentation to parliament on Wednesday (18 August), Kganyago said that the biggest risk to the country remains Eskom and the fact that South Africa continues to face load shedding even as the economy looks to recover from the worst of its Covid-19 lockdowns.
Kganyago said that power cuts could have been even worse if the economy had recovered faster than expected, leaving the country in a difficult situation.
Data published by the Council for Scientific and Industrial Research (CSIR) in August shows that the country has spent a significant amount of 2021 in the dark.
The report shows that South Africa experienced 650 hours of load shedding in the first half of the year – the equivalent of 27 full days.
By comparison, 2020 is currently the worst year of load shedding on record, with 859 hours lost over a 12 month period. 2021 has already seen 76% of the load shedding experienced in 2020.
In the first half of 2021, load shedding occurred each month, dominated by Stage 2, with most power cuts happening across March and June.
More Covid-19 waves and lockdowns
Kganyago said another major risk to South Africa is future Covid-19 waves, leading to further slowdowns in recovery.
“We are now in the third wave of Covid-19 and do not know when the fourth wave will hit us and whether we could even have a fifth wave. This remains a risk to the economy,” he said.
Health experts this week said that the fourth wave of Covid-19 infections is set to hit South Africa at the beginning of December.
Salim Abdool Karim, former chairman of the government’s ministerial advisory committee on Covid-19, told Bloomberg that the current estimates show the fourth wave starting on 2 December and will last about 75 days.
The government assumes that the wave will follow a similar pattern to the current one and that there will be a new variant by then, he said at a Government Technical Advisory Centre conference. Data suggests the current wave will end around 26 August.
Kganyago said that the Reserve Bank was also concerned about how the recent violence and unrest seen in Gauteng, KwaZulu-Natal and parts of Mpumalanga could have on future investment.
He added that the destruction could have dented general business confidence.
The Reserve Bank’s report shows that the widespread looting caused significant damage to parts of the country seen as key GDP contributors, with these three provinces accounting for 59% of GDP.
“The social unrest is expected to temporarily interrupt the 2021 GDP growth recovery. We do not have a full handle as yet, as to what the extent of the shock is,” he said.
He added that the SARB has forecast a reduction of 0.4%.
Inflation quickens on global reflation and a commodity correction
Kganyago said that inflation could quicken as global reflation takes place, necessitating a change in South Africa’s monetary policy stance.
The SARB governor said that there was also a risk that there could also be a sharp correction in commodity prices, leading to a further deterioration in South Africa’s public finances.
“Put simply, the (recent commodity) price increases are a temporary phenomenon and should be used to help rebuild South Africa’s defences.”