Page 7 - AfrElec Week 08 2023

AfrElec INVESTMENT AfrElec

Fitch guarded over likely economic impact

of energy crisis in South Africa

SOUTH AFRICA FITCH Ratings has warned that while South Ramaphosa’s government is promoting greater
Africa’s economy still has the capacity to with- private sector investment into renewable gener-
stand the impact of the prevailing electricity ation. On February 9, he declared the electricity
shortage in the short term, a prolonged crisis shortage a “state of disaster” and said he would
could be damaging. appoint a minister of electricity to serve in his
In a release on February 15, Fitch maintained office.
a ‘BB-’ with a stable outlook credit rating for the The declaration, Fitch said, could strengthen
continent’s most modern economy despite the the government’s capacity to resolve the crisis at
energy shortage, which results in chronic, almost Eskom, the state-owned power utility.
daily rolling blackouts, known locally as load “However,” it warned on Wednesday, “the
shedding. generally poor track record on execution and
According to a local publication News24, Eskom’s governance problems, highlighted by President Cyril
Fitch anticipates the power cuts to continue into the resignation of Eskom’s chief executive in Ramaphosa’s
2023, but “the further deterioration of electricity December, suggests further delays are possible.”
supply goes beyond our base case and presents In a release on February 10, Moody’s rated government
downside risks to our forecast that economic South Africa as ‘Ba2’ with a stable outlook,
growth will average 1.1% in 2023”. which is two notches into sub-investment grade. is promoting
South Africa has been experiencing an On the energy crisis, Moody’s said, in addition
energy deficit since 2007 with demand exceed- to hurting the economy, it can spark political greater private
ing the capacity of its long-serving coal-fired instability. sector investment
plants, which often break down. Organised “We expect the blackouts’ effect on busi-
gangs also regularly steal copper cables, worsen- nesses, consumer sentiment and investment will into renewable
ing the situation. Resultantly, power cuts can be weaken the country’s already subdued economic
as long as 12 hours daily. growth prospects and threaten social and polit- generation.
However, Fitch said it has not revised its ical stability,” said Moody’s as cited by News24.
growth projections due to higher-than-expected “Given South Africa’s social inequities and
growth in the third quarter of 2022, which it high unemployment rates, social and political
believes “should limit the size of downward revi- instability are likely to intensify, especially given
sions to our 2023 growth forecast”. the electricity regulator’s January decision to
There is still headroom for the economy to grant an increase in electricity prices of more
absorb a “temporary impact on economic met- than 18%, effective 1 April.”
rics from load shedding,” News24 writes, but “a Fitch forecasts that the fiscal deficit will be
failure to address load shedding in the medium 5.1% at the end of the 2022/23 financial year,
term or a further deterioration in the growth tra- wider than the government’s forecast of 4.9%.
jectory would be credit negative for SA [South Moody’s does not expect a major widening of
Africa].” the deficit as it expects that government would
In an effort to close the gap, President Cyril reduce spending commensurately.™

Week 08 22•February•2023 www. NEWSBASE .com P7