Comical timing of load shedding in South Africa – signs of an ‘unfixable disaster’

 ·7 Sep 2022

Second quarter (Q2) 2022 Gross Domestic Product (GDP) data published by Statistics South Africa showed a decline of 0.7% quarter-on-quarter – which was quickly followed by yet another load shedding announcement from power utility Eskom.

“Not only is the local economy currently negatively impacted by global events, such as a strong slowdown in economic activity in most of our trading partners, but local issues, most notably the record levels of load shedding and recent floods in KwaZulu-Natal have clearly had a detrimental impact on growth,” Citadel chief economist Maarten Ackerman.

Year-on-year, GDP increased by a disappointing 0.2%. “The movement was so close to zero, it was basically flat. Although we recovered to pre-pandemic levels in Q1 this year, we have now slipped back to pre-pandemic levels,” said Ackerman.

“In rand billions, the South African economy remains at 2018 levels which speaks to the structural issues holding back our growth. While the economy is stagnating, the population keeps on growing which adds to the unemployment and social issues we are dealing with.”

In total, seven industries contracted in the second quarter of 2022. Ackerman said the primary sector was the hardest hit, contracting by 5.1%. As the biggest negative contributors to this contraction, the previously booming agriculture and mining sectors reported decreased production of animal products, gold, coal and diamonds due to power supply and export difficulties.

“This is unsurprising as the sector is heavily dependent on energy, which was a scarce commodity in Q2 due to load shedding,” said the chief economist. The secondary sector was also significantly impacted by load-shedding, contracting by 4.8%.

Gross fixed capital formation rose 0.5% from the previous quarter, which according to Ackerman, was the biggest positive, as, over the past decade, it has recorded more negative quarters than positive ones.

“It’s very encouraging to see this trend emerging, and it seems to be getting stronger. This is in line with some of the other fixed investments we see in the economy. The positive performance of our GFCF is clear evidence that the economy and companies are reinvesting back into the economy and increasing the future capacity.

“Investments in things such as transfer costs, machinery and other equipment, non-residential buildings and other assets are encouraging and usually pave the way for better and stronger growth in the long-term,” he said.

Ackerman believes the tough quarter the economy experienced due to the country’s electricity challenges may resolve in time. “Consumers seem fairly okay in a tough environment, and GFCF remains positive,” he said.

“The government’s acknowledgement of the country’s energy crisis, and the Presidency’s move to lift caps on private (captive) power generation by big manufacturers and mines, will hopefully help to accelerate the country’s transition to a more sustainable green energy future. It’s encouraging to see a record number of renewable energy projects in the pipeline, and one can only hope this attracts more foreign direct investment,” said Ackerman.

Cape Town mayor, Geordin Gwyn Hill-Lewis, was less pragmatic. He said in a statement on Tuesday (6 September) that Eskom’s announcement of further load-shedding until Saturday should deeply concern every South African.

“The announcement was made only a few hours after news broke that the national economy contracted back to pre-pandemic size in the second quarter of this year,” he said.

“This is, sadly, unsurprising. This year has seen the worst year of blackouts on record, at some of the highest “stages” ever. Each stage of load shedding costs the national economy R500 million per stage per day; the two weeks of stage 6 load-shedding in late June/early July destroyed R4.2 billion worth of wealth per day,” said the mayor.

According to Hill-Lewis, load shedding is the single biggest driver of unemployment and therefore the single biggest driver of poverty. “The more the national economy continues to bleed jobs and wealth, the further this acute socio-economic crisis will become a chronic and unfixable disaster.”

The mayor said there would be no load-shedding in Cape Town while the rest of the country is on stage 2.


Read: South Africa’s cost-of-living crisis has worsened over the past 10 years

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