S&P cites intense rolling blackouts as it downgrades SA’s outlook

Ratings agency S&P has downgraded its outlook on South Africa to stable from positive, citing the intense rolling blackouts and other infrastructure constraints.

The agency says also worrying is the slow implementation of structural reforms and delays in dealing with governance and performance of state-owned companies. It says contingent liabilities from SOE’s pose continued downside risks to the country’s fiscal and debt position.

The electricity crisis continues to cause mayhem in the local economy on many fronts.

S&P says the load shedding and other infrastructure challenges are weighing on growth.

The local economy contracted by 1.3% in the fourth quarter of 2022, more than markets expectations, mainly due to the electricity crisis. Without speedy resolution to the challenges, it’s expected the economy will be in recession in the first quarter.

“There are some real obstacles to South African economic growth. We all know about electricity and there isn’t really any light at the end of a tunnel and the latest cabinet reshuffle also didn’t do much for this particular prospect, not just with regard to electricity, but also remember our rail capacity is 40 to 45% of what it used to be; our ports are operating at really terrible capacity level,” says Dr Iraj Abedian, Chief Economist, Pan African Investments.

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“I’ve been told Cape Town is operating at 35% of its capacity. We’ve seen the trucks getting from SA to Maputo because Transnet rail doesn’t manage its capacity and its capacity has gone up to 50% and so on and so forth. Overall, whatever aspect of the economy that we look at, over and above the energy that has become trickling and government seems to be stuck in doing something about other than talking about it.”

Abedian says government need to act on reforms with speed to get the country out of the junk status.

“We are already at junk grade. So, when you are under the water, whether you are a meter down or five meters, it doesn’t really makes much of a difference and the South African economy at the moment is under the water and there isn’t enough urgent interventions apart from talk and the statements which does nothing. There aren’t enough interventions with haste that this economy needs to pull it from under the water and enable it to breathe and grow again,” says Abedian added.

Responding to the move by S&P, the government says it is taking urgent measures to reduce load shedding in the short term. It says it’s also in the process of transforming the sector through market reforms to achieve long-term energy security. It also says other reforms especially in freight rail are under way.

VIDEO: S&P cites intense rolling blackouts as it downgrades SA’s outlook: Dr Iraj Abedian

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Source: SABC News (sabcnews.com)