Electricity production down and manufacturing not producing at full capacity

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Unreliable power supply has eaten away at the country’s economic growth. Photo: Getty Images
Unreliable power supply has eaten away at the country’s economic growth. Photo: Getty Images

BUSINESS


Electricity production and distribution declined by another 4% year-on-year in June after dropping by 4.2% in May and 3.8% in April. Statistics SA said on Thursday consumption also contracted 1.1% year-on-year June after sliding by 2.4% in May and 2% in April.

Unreliable power supply has eaten away at the country’s economic growth. It was widely expected that growth in the three months to June would have contracted because of load shedding and the floods in KwaZulu-Natal that caused disruptions to the country’s supply chains.

Investec economist Lara Hodes said:

South Africa’s economic growth potential has been meaningfully hindered by electricity supply disruptions. It continues to cloud sentiment, reduce the country’s competitive position, and accordingly deter investment.

Last month, President Cyril Ramaphosa announced a plan he believes will provide the country with secure electricity supply going forward after workers at Eskom went on strike over salaries, further disrupting power supply such that stage 6 load shedding had to be implemented.

READ: Highway robbery as electricity middlemen make 46% profit from power sales

While a large portion of the plan hinged on removing government’s red tape and using renewables, parts of it focused on fixing national power utility Eskom, including opening the purse for it to undertake critical maintenance in six key power stations and taking away some of the utility’s debt burden.

The details will be announced in October by the finance minister.

Hodes said this would:

assist in raising sentiment once notable implementation is underway and actively delivers results.

This data comes on the back of purchasing managers index which fell into negative territory after falling below 50 index points last month for the first time since July last year, contracting to 47.6. This drop in manufacturing production was a result of the excessive load shedding that the country experienced last month.

Meanwhile, the manufacturing sector was not producing at full capacity in May according to the latest utilisation of manufacturing production report from the statistics agency.

READ: Scores of small steel firms close down

Production capacity dropped lower than the same period during the Covid-19 pandemic lockdown last year – from 77.8% to 77.2%.

The floods in KwaZulu-Natal saw manufacturers struggle with raw materials, labour and insufficient demand in May.

Four manufacturing divisions, including motor vehicles and food manufacturers, recorded declines in May. The manufacturing sector contributed 0.6 percentage points to gross domestic product in the first quarter, but this may be different for second quarter growth.


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