Eskom will derail growth - investors

Staff Writer | Mar 23, 2019

On Wednesday, 20 March 2019 we reported that the ANC is aiming at 5% growth. The reality check is very sobering

An article in Business Day (Global banks: load-shedding will derail investment drive, BL PREMIUM, 22 MARCH 2019 - 05:10, SUNITA MENON) quoted Goldman Sachs as saying that load-shedding could subtract 0.3 percentage points of economic growth in the first quarter, and if it remained as severe as it is now, at stage four, which involves the removal of 4,000MW in long and regular blackouts, it could cut it by close to a full percentage point.

“If the current intensity of load-shedding were to persist in 2019, it could subtract up to 0.9 percentage points from annual growth," Goldman analysts wrote in a note to clients.

The return of power cuts resulted in economists downgrading their growth forecasts for 2019. A failure to meet the government’s 1.5% prediction will result in a further deterioration in the country’s fiscal position.

In turn that will heighten concern that SA will lose its last remaining investment-grade rating, from Moody’s Investors Service, resulting in capital outflows as SA gets kicked out from international bond indices.

President Cyril Ramaphosa said he aimed to attract $100bn by 2023.

Higher inflows, which were driven by small to medium transactions, could be attributed to a more positive investor environment in 2018. However, this could be reversed as load-shedding persisted.

Merrill Lynch said that investors are asking, if Eskom can’t solve its problem, then why invest at all. Merrill Lynch forecasts growth of 1.3% for 2019. The SA Reserve Bank forecasts 1.7%, compared to 3% pledged by Ramaphosa for 2018.

Of the investors polled by Merrill Lynch, 92% expected growth to be below 1% in 2019.

The policies necessary for growth, Eskom aside, have been highlighted repeatedly, but the ANC continues to follow a socialist path, if it’s following any path at all.

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