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World Bank Cuts South African GDP Growth Forecast Due to Eskom’s Load Shedding

The World Bank is the first key institution to cut its economic growth forecast for South Africa to below 1% for 2020 due to electricity supply concerns.

It now expects the economy to expand by 0.9% this year, the Washington-based lender said Wednesday in its Global Economic Prospects report. That compares with an estimate of 1% in its Africa Pulse report released in October and is well below government forecasts. Its outlook for Africa’s most-industrialized economy is “markedly weaker” because it sees electricity supply and infrastructure constraints inhibiting domestic growth with weaker global economic conditions weighing on export demand.

The bank’s revision comes as Eskom which generates about 95% of the country’s electricity, resumes rolling blackouts earlier than expected. The power cuts threaten to drag on an economy stuck in the longest downward cycle since 1945 and that hasn’t expanded by more than 2% annually since 2013.

The debt-laden power utility, described by Goldman Sachs Group as the biggest threat to South Africa’s economy, put the country at risk of a second recession in as many years after it implemented the most severe power cuts to date in December. Gross domestic product growth likely slowed to 0.4% in 2019, the World Bank said.

The World Bank sees GDP growth averaging 1.4% in 2021-22 if President Cyril Ramaphosa’s administration is able to ramp up structural reforms and address policy uncertainty, and if there’s a recovery in public and private sector investment.

 

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Sources: [1], [2]. Image sources: [1], [2].

South African Cabinet Approves New National Energy Plan

In the midst of more electricity outages, courtesy of faults with Eskom’s power generation plans, the South African Cabinet has approved a new national energy plan.

Cabinet on Thursday announced it had approved the promulgation of the Integrated Resource Plan (IRP), South Africa’s policy blueprint for the electricity sector.

The IRP spells out a proposed energy mix for the country until 2030. In a statement, Cabinet said “most of the inputs” from experts in the sector, the public and academia, received during a public consultation process last year were included in the 2019 IRP.

“The plan proposes nine interventions to ensure the country responds to the energy needs for the next decade. The interventions draw from the current baseline of the demand and supply of the country’s energy and the country’s international obligations to the minimum emission standards,” the statement said.

“The plan remains within the policy framework of pursuing a diversified energy mix that reduces reliance on a single or few primary energy sources. It will be revised in line with the changing energy sector environment.”

The approved IRP can be accessed on the mineral resources and energy website after it is gazetted. The IRP was released as the country is experiencing another round of rotational power cuts as Eskom moves to fix boiler tube leaks at five of the utility’s generating units.

Business Unity South Africa this week warned that any further delay in releasing the IRP would prejudice procurement and investment decisions to ensure security of power supply.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: Jan Kubita [1], [2].