South Africa’s economic growth will shrink by at least 1.1 percentage points in 2019 and there will be up to 125 000 job losses if nationwide electricity blackouts persist throughout the year, the central bank said on Wednesday.
Ailing state utility Eskom switched out the lights across the country in February and March as low coal supplies, a severe cash crunch, and multiple failures at its ageing fleet of power stations throttled supply.
The debt laden state firm began by cutting supply by 1 000 megawatts before ramping up to 4 000 MW, leaving households in the dark and businesses across mining, manufacturing and retail unable to operate.
“Should these interruptions continue throughout 2019, it is likely to reduce growth by 1.1 percentage points,” the Reserve bank said in its Monetary Policy Review publication, the second for the year.
“Under these circumstances, employment is likely to be lower by an estimated 125 000 jobs, with around 48 000 jobs lost to the first shock and 77 000 to the second,” the bank said, referring to the mining and manufacturing sectors.
The review dimmed hopes for the economic rebound promised by President Cyril Ramaphosa and comes less than a month before national elections.
Read: Ramaphosa’s ‘new dawn’ faces same dark clouds
In its February budget the National Treasury forecast gross domestic product (GDP) expanding at 1.5% from 0.8% growth in 2018. At its policy meeting in March the central bank pushed down its growth forecast to 1.3%.
Bets of growth above 1% have helped the country cling on to its remaining investment grade credit rating from Moody’s.
Earlier this month the public enterprise minister said the government would help Eskom keep the lights on and resort to so-called stage 1 load shedding – 1 000 MW of rolling blackouts – as a last resort.
But Eskom, burdened by debt of around R450 billion, said it needed more money in addition to the R69 billion bailout granted by the government, to keep the lights on.
That raised fears it may drag down growth and prompt Moody’s to downgrade the country’s sovereign rating to junk.
First quarter GDP data is only due in June, but indicators of private sector activity, business confidence, mining and manufacturing have already shown signs of a negative impact of the power cuts.