News in South Africa 13th February:

1. 68% chance of recession:

South Africa’s economy is increasingly vulnerable to a recession in the next 12 months, with an ongoing electricity crisis seen further curbing activity.

68% chance of recession
Photo by Timur Weber

The probability of a recession stands at 68%, up from odds of 45% in January, according to Bloomberg’s latest monthly survey of economists.

The poll was conducted Feb. 3-9, with six economists responding to a question about the chance of a recession.

The prediction comes after Eskom said rolling blackouts, known locally as load-shedding, are likely to persist for at least two more years as the state-owned power utility overhauls its ageing, mostly coal-fired plants.

The company, which produces almost all of South Africa’s electricity, has struggled to meet demand since 2008, and has imposed outages every day this year to protect the grid from collapse.

Sustained outages are seen as the most significant risk to economic growth.

Economists polled by Bloomberg predict the economy shrank in the final quarter of 2022 and that it’s on course to contract in the three months through March.

Statistics agency data published this week showed mining and manufacturing output, which make up about a fifth of total gross domestic product, declined in the December quarter.

The survey results are in line with expectations by Absa Group’s economists, including Peter Worthington and Miyelani Maluleke, who this week became the first major institution to say the economy is in a technical recession.

The impact of load-shedding on economic growth in 2023 and beyond is uncertain because it isn’t clear how quickly the government and Eskom can alleviate outages, and it’s difficult to assess how different severities of power cuts affect overall activity, the Johannesburg-based lender cautioned.

The electricity crisis is costing the country as much as R899 million ($51 million) per day, according to South African Reserve Bank estimates.

2. Stage 4 load shedding this week:

Power utility Eskom says a stage 3 and stage 4 load shedding rotation will continue this week until further notice.

Stage 4 load shedding will continue to be implemented at 16h00 to 05h00 daily, while stage 3 load shedding will be implemented at 05h00 to 16h00 daily.

A further update will be published as soon as any significant changes occur, the group said.

The daily rotation will be as follows;

Daily, until further notice

  • Stage 4: 00h00 to 05h00
  • Stage 3: 05h00 to 16h00
  • Stage 4: 16h00 to 00h00

Over the past 24 hours, two generating units at Arnot and one at Kendal power stations suffered breakdowns and were taken offline for repairs. The return to service of a generating unit each
at Lethabo and Hendrina power stations were delayed.

A generating unit each at Grootvlei and Kriel power stations were returned to service during the period.

Breakdowns currently amount to 16,920MW of generating capacity, while 5,759MW of generating capacity is out of service for planned maintenance.

3. R10bn fund for SMEs:

President Cyril Ramaphosa, in his State of the Nation Address (Sona) on Thursday, announced several initiatives to support the recovery of small- and medium-sized enterprises (SMEs), after the events of the last few years battered the sector.

Ramaphosa revealed that government, working with the SA SME Fund, will establish a R10 billion fund aimed at supporting SMME (small, medium and micro-sized enterprise) growth.

The majority of the funds are expected to come from the private sector, but the president did say that government is investigating the feasibility of contributing R2.5 billion to the fund.

He also announced a plan to provide R1.4 billion in financing to the Small Enterprise Finance Agency (Sefa), which will go towards assisting 90 000 entrepreneurs.

Plans to assist businesses with their transition to alternative power generation, via the bounce-back loan scheme that government introduced in 2022 to assist businesses with their recovery from the pandemic, were also announced in Sona.

While welcoming the government’s plans to support the sector, financial commentator Michelle Austin says it does little help to throw money at a problem if the economic environment does not allow for growth.

4. Post office retrenchments proceeding:

The Communications Worker Union (CWU) has claimed that the SA Post Office (SAPO) is going ahead with plans to retrench 6 000 workers.

CWU general secretary Aubrey Tshabalala said SAPO “dropped a bombshell at the doorstep of the union by giving a notice in terms of Section 189 and 189 (A), which means it intends to dismiss 6 000 workers.”

Section 189 of the Labour Relations Act allows an employer considering large-scale dismissals to undergo a consultative process to determine whether such dismissals are deemed necessary to keep its operations going.

Tshabalala said this happened a week after the Post Office called a meeting with unions to discuss salary cuts of 40% and work-hour reductions.

“The company failed to adhere to its own processes where such matters should and can be discussed at the bargaining chambers with all the key stakeholders.”

SAPO spokesperson Johan Kruger told reporters they were in the midst of “a consultation process about this matter.”

“No final decision has been taken.”

5. Kusile could be repaired by July:

The fire-damaged Unit 5 at Kusile power station will be repaired three months earlier than expected after Eskom COO Jan Oberholzer flew to Japan to secure a key undertaking from power station boiler contractor Mitsubishi.

Engineers are now working to have the 800-megawatt Unit 5 repaired by July – originally expected to be finished by October.

Further commission activities mean that the Unit will only come online in October this year, which is still a significant improvement.

All information sourced from articles posted by: DailyInvestor, BusinessTech, Moneyweb, Fin24, and News24.

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