Eskom’s power rationing bite into recession

South Africa’s power utility, Eskom Holdings, which has battled operational difficulties and requires regular financial support from the National Treasury — has been identified as a key threat to the economy.

One of the worst kept secrets in South Africa was today laid bare after Statistics South Africa confirmed that South Africa’s economy has entered a recession following poor electricity supply in the fourth quarter of 2019.

The local gross domestic product (GDP) contracted by 1.4% during the last three months of last year, following a 0.8% decline in the third quarter and reaffirming the dire state of the local economy.

The widespread loadshedding episodes affected severely seven out of ten industries, namely transport, storage & communication  trade, catering & accommodation, construction, utilities, manufacturing, agriculture, forestry & fishing and government services.

The data released by Stats SA shows that for the full year, the economy managed growth of just 0.2%, down from 2018’s 0.8%, the sixth consecutive year that SA’s economy has grown below 2% and the lowest level since 2009, according to Stats SA.

The fourth quarter contraction compared to a revised contraction of 0.8% in the previous quarter. Stats SA had previously put that decline at 0.6%.

Bianca Botes, Treasury Partner at Peregrine Treasury Solutions, said: “While a contraction was largely expected, the decline exceeded market expectations, demonstrating how extensively the electricity crises in South Africa continues to plague the economic prospects of the country”

The power utility has already warned the country to expect power cuts for the next 18 months as it works to stabilize its operations.