Stage 6 load shedding a major blow to growth, tax revenue - economists

Economists have warned that the implementation of stage 6 load shedding for the first time would further dampen SA's already poor economic growth prospects.  

Eskom on Monday announced it was implementing stage 6 load shedding, which allows for up to 6 000MW to be cut from the national grid.  It downgraded the load shedding level back to stage 4 at 10pm, but warned that cuts were likely for the rest of the week as the Eskom continues to battle severe capacity constraints caused by unplanned outages and flooding. 

President Cyril Ramaphosa, in a statement, said that public anger over the "devastating" power cuts was understandable, while Minister of Public Enterprises Pravin Gordhan apologised on eNCA. 

"With Eskom confirming a Stage 6 black out from today, one thing is certain: the SA economy is now condemned to recession," economist and CEO of Pan-African Investment and Research Services Dr Iraj Abedian said in a tweet.

Abedian called for Eskom to be placed into voluntary business rescue, as happened to debt-laden national airline SAA last week.

"Clearly after 11 years the Cabinet hasn't learned that Eskom is a broken machine, the longer it focuses on rescuing Eskom the more the economy will weaken, jobs will be lost and brand SA will suffer. Free the energy sector, cities can generate electricity, firms can. Stop the madness."

Stanlib chief economist Kevin Lings also took to Twitter to warn of the impact offstage 6 load shedding on the economy, particularly tax revenue collections.

"Eskom has announced stage 6 load shedding. Further knock to business and consumer confidence, negative impact on retail activity at an important time for most shops, will also hurt tax revenue collection, especially VAT. Economy set to stagnate further," Lings tweeted.

South African projected economic growth prospects for 2019 have been repeatedly downgraded, with the SA Reserve Bank now anticipating GDP growth of just 0.5%, which is far below that of most other emerging market economies. The SA economy contracted by 0.6% in the third quarter of the year, the second time this year the country's GDP has shrunk. 

DA leader John Steenhuisen, in statement on Monday evening, said the implementation of stage 6 power cuts was "devastating news for our already struggling economy and fatal to both economic growth and job creation".

He also called on President Cyril Ramaphosa to cancel an official visit to Egypt to address a reconvened Parliament. 

"The President must come clean on exactly what the structural problems at Eskom are and how his government plans to address them within the coming days," Steenhuisen said.

Ramaphosa, in a statement of the power crisis on Monday evening, did not mention Steenhuisen's call to return to SA. 

In a market update issued on Tuesday morning, RMB Global Markets Research Economist Siobhan Redford noted that the rand took a knock too. "Some of the consequences of this new level of load shedding have been immediate – the rand nosedived 11 cents to 14.69 against the greenback," Redford commented.

Furthermore, mining production will also be negatively impacted, given that some mines halted night shift operations on Monday, Redford warned. "[It] not only means that mining production will take a hit, but it could also negatively impact employment in the industry, especially should stage 4 and above load-shedding continue."

Andre Botha, senior dealer at TreasuryONE suggeested that the SA economy could end the yearr in a recession, given the impact of load shedding. "South Africa could end 2019 in a recession which could lead to the downgrade to junk status," Botha said in a market update.

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