Economists at Nedbank say that South Africa’s economy likely scraped by with a marginally positive growth figure for the third quarter of the year – but the prospects heading into 2024 remain bleak as both the power and Transnet crises continue to pummel industries.
In a GDP expectations note on Friday (1 December), Nedbank said that South Africa is likely to show just 0.1% GDP growth in the third quarter, down from the 0.6% growth figure posted in Q2.
This is a result of various sectors in the economy showing significant declines in production – even despite the lower levels of load shedding over the period.
“Despite the improvements in electricity supply, the damage done and the costs incurred in the drive for greater self-sufficiency, together with the operational issues at Transnet, stricter financial conditions, weaker global demand, and cheaper commodities, all weighed on industry, resulting in a moderation in output in most sectors over the quarter,” the group said.
Looking at the sector analysis, production (year-on-year) has been almost entirely in decline in the third quarter, with positives seen in accommodation income, food services, passenger transport and real credit extended.
However, mining, manufacturing, electricity, buildings, wholesale and retail sales and vehicle sales have all shown decline.
“The economy probably lost significant momentum in Q3 despite the improvement in energy availability. While the intensity of power shortages declined by 18.8% relative to Q2, a substantial 5 942 GW of electricity was shed over the quarter, with 121 more hours (5 days) of load-shedding and more time spent at stages 1-4.
“As a result, the energy-intensive primary and secondary sectors continued to buckle under the pressures of operational difficulties,” Nedbank said.
Despite the improved energy availability factor over Q3, the underlying energy problem remains unresolved, the bank said, a trend which it expects to continue into the new year.
“Operational failures on the part of Transnet have also worsened, with time lags significantly increased at the ports. According to the South African Association of Freight Workers, 46,000 containers were stuck outside two ports off the coast of the Eastern Cape and 61,986 containers outside the Durban port in November,” Nedbank said.
The outlook for the rest of the year and into 2024 remains bleak, Nedbank said.
“The power crisis, other logistical constraints, weaker global demand, and lower international commodity prices will continue to undermine production across sectors,” it said.
Although inflation has come down meaningfully, the cumulative 475-basis point hike in interest rates will continue to strain household finances, weighing on consumer confidence and demand.
“These pressures will cap the upside for services. Altogether, we expect meagre growth of another 0.1% in Q4, limiting real GDP growth to 0.7% in 2023, down from 1.9% in 2022,” it said.
On the upside, the bank anticipates a modest cyclical recovery from 2024 onwards, with growth averaging around 1.3% over the next three years.
“Domestically and globally, falling inflation and lower interest rates will likely boost demand. However, much still depends on whether private companies can shift more aggressively to alternative energy, whether Eskom can reduce load shedding, and whether Transnet can enhance efficiencies significantly,” it said.
Stats SA will publish the latest GDP numbers on Tuesday, 5 December.