The World Bank has cut back on its forecast for South Africa’s economic growth in 2020 to just 0.9%, mainly because of load shedding concerns.
The global lender revised its forecast in its latest Global Economic Prospects report released on Wednesday. Its earlier forecast was 1.7%.
The Bank stated, “In South Africa, growth is expected to firm to 0.9 percent in 2020, before strengthening to an average of 1.4 percent in 2021-22.”
‘Electricity supply constraints’
However, this assumption is based on whether or not President Cyril Ramaphosa’s administration will implement structural reforms at a faster pace, the World Bank said.
Other assumptions are that “policy uncertainty wanes and that investment—both public and private—gradually recovers.”
“The outlook is, however, markedly weaker than previous projections. Increasingly binding infrastructure constraints—notably in electricity supply—are expected to inhibit domestic growth, while export momentum will be hindered by weak external demand,” the Bank added.
This projection is much lower than the South African Reserve Bank’s (SARB) forecast of 1.4% growth in 2020, which it made in November 2019.
Load shedding resumes
World Bank’s grim forecast comes as struggling power utility Eskom has resumed stage 2 load shedding.
After two days of overnight load shedding, Eskom announced on Thursday morning that it would implement it during the day because “the system remains severely constrained and unpredictable.”
It said, “We have lost additional generation capacity overnight with breakdowns of over 14,000MW.
“Our emergency reserves are also insufficient to meet the demand for electricity during the day. As a result, we have to load shed throughout the day and tomorrow.”
The shortage of capacity this week is particularly concerning because demand after the festive season was only expected to rise in mid-January.
It is therefore likely that Eskom will implement higher stages of load shedding once demand picks up, which could potentially dent South Africa’s economic growth prospects even further.