Durban, South Africa-April 16, 2022: Heavy rains, landslides, rains and winds in Durban followed by heavy debris at the port of Durban. The harbor acts as a breakwater for the city of Durban’s economy.
RAJESH JANTILAL / AFP via Getty Images
South Africa’s economy gained momentum in the first quarter of this year, but the threat of historic floods and unprecedented power outages in major states is putting a brake on its recovery.
Durban’s port city and the wider KwaZulu-Natal province in eastern South Africa were hit by the country’s worst gunwater for decades in April, killing hundreds of people and freight at the busiest port in sub-Saharan Africa. Transport was curtailed.
The Absa / BER manufacturing PMI surged to a record high of 60.0 in March, but plummeted to 50.7 in April. this is, Violent riots after the arrest of former President Jacob Zuma In July of last year.
KwaZulu Natal, South Africa’s second most populous state, has also been the center of the worst riots in the country since the end of apartheid.
S & P Global Composite PMI also fell to a four-month low, and in a note last week, Capital Economics emphasized that high-frequency data indicate stagnant mobility recovery.
According to JP Morgan economists Sthembiso Nkalanga and Sonja Keller, quarterly figures show mixed conditions, but seasonally adjusted quarterly GDP growth is 3.5%.
However, the disastrous PMI display in April poses a downside risk to JP Morgan’s second-quarter GDP growth forecast of 1.5%. In addition to the global background of the war in Ukraine, soaring inflation and China’s supply struggle, South Africa is also dealing with floods and domestic shocks in electricity distribution.
Much of the decline in manufacturing PMI was concentrated in KwaZulu-Natal’s ports and manufacturing activities, with manufacturing activity declining from 60.5 in March to 39.6 in April.
Load limits (intentional shutdown of some power in the power system to prevent overload failures) expanded significantly in April, and this year’s power savings are already significant as seen in 2021. It is expected to exceed.
Johannesburg, South Africa: On June 9, 2021, due to an ongoing power outage, Soweto residents picketed near the entrance to the state-owned company Eskom Offices in Megawatt Park in Midland, near Johannesburg. Eskom announced on June 9, 2021 that two power plants will undergo a nationwide power outage as consumption increases due to the start of cold weather and breakdown.
Photo by PHILLMAGAKOE / AFP via Getty Images
Even if floods are significantly reduced, reduced electricity supplies pose a consistent problem for the South African economy.
Jason Tabby, senior emerging market economist at Capital Economics, said the state’s utility’s electricity availability (which measures the electricity available as a share of the maximum amount of electricity that can be produced) has been a record in recent weeks. He said it remained at a low level.
Public Works Minister Pravin Gordhan warned that Eskom could rely on stage 8 load limits with up to 12 hours of power outages a day to avoid a complete collapse of the country’s power grid.
“Some shocks, such as floods, are clearly out of government control, but without them, recovery will continue to be curtailed unless problems affecting the power sector are resolved.” Tuvey said.
The International Monetary Fund forecasts South Africa’s real GDP growth rate in 2022 to be 1.9% adjusted for inflation.
Thursday Eskom announced the implementation of Stage 2 load limits between 5 pm and 10 pm local time.
“At the beginning of winter there is an increase in demand, which will lead to capacity constraints during this period, especially during the evening and morning peaks. Unfortunately, this generally implements road shedding during the evening peaks. I need it, “he said in a statement.
Eskom reiterated that load limits were “a last resort to protect the country’s grid,” urging South Africans to continue to use electricity “modestly”, especially early in the morning and in the evening.
Possibility of second quarter contraction
The government has declared a disaster situation in response to the flood and has begun efforts to repair the damage.
JP Morgan’s Nkaranga and Keller said in their latest research note, “But given the damage to the road infrastructure and delays at the port, the April slide is slower than the rapid rebound seen after the turmoil last July. I expect it to reverse. ” ..
“On the other hand, energy availability will be significantly reduced this year, increasing the risk of long-term power outages. On the other hand, consumer resilience, which seems to have led to GDP growth in the first quarter, is now due to pressure on purchasing power. The quarter should decline. “
Against this background, JP Morgan said, “GDP There is an increased risk of slowing growth or even shrinking. ” quarter. “