South Africa’s economy is getting bogged down
The underlying operating environment for businesses across the country is unlikely to improve amid an escalation in the frequency and duration of power outages, with the economy stuck at stages 5 and stage 6 load shedding, says Nedbank.
In its latest Economic Monitor report, the group’s data showed that the country’s economy has been in the trenches, with a handful of market indicators from the last quarter painting a concerning picture.
Rolling blackouts continue to damage business practices across the country in major sectors. According to the South African Reserve Bank (SARB), when looking at the percentage of business hours lost over 2022 due to load shedding, the industrial sector reported a 14% decrease, while the commercial and agricultural varied between losses of 11% and 12% of hours.
The bank said that with load-shedding expected to increase from 157 days in 2022 to 250 days in 2023, the loss in business hours is expected to rise, further stalling business and economic growth in the country.
The country’s overall monetary aggregate – the amount of money in the economy currently circulating to supply its monetary needs – surprised on the downside in the previous month, bogged down by a weak economy and sharply higher interest rates.
On top of this, growth in the broad money supply, including notes, coins and other liquid assets, slowed to 8.9%, down from 10.8% in February and far below Nedbank’s expectation of a slight moderation to 10% and the consensus market forecast of a slowdown to 9.9%.
According to the bank, this drag came from an R54.2 billion decline in net foreign assets and a far smaller increase of R9.5 billion in claims on the private sector.
Private sector credit extension also slowed to 7.2% in March, down from 8.3% the month before and weaker than Nedbank and general market expectations.
The bills and investment category experienced a significant contraction of 14.8% year-on-year, contributing to a decrease in growth, added Nedbank.
Additionally, loans and advances (excluding bills and investments) also experienced a decline in growth, dropping to 9.5% year-on-year in March after unexpectedly increasing to 9.9% in February from 9.7% in January.
South Africa’s trade account surplus narrowed to R6.9 billion over last month from R10.7 billion in February. Broadly speaking, a constant decline in the prices of the country’s main export commodities over the past year, combined with domestic logistical constraints and load shedding, has limited the country’s export volumes.
In March, export levels increased by 2.5% year-on-year as imports surged by 32%.
“Exports were contained by lower mining exports, with mineral products (primarily coal) down by 9% year-on-year due to the slump in global prices and lower volumes of output and exports, which have been hurt by domestic logistical constraints. Precious or semi-precious stones fell by 9.6% year-on-year,” said Nedbank.
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