Nedbank believes South Africa has likely entered a recession and this is due to the rolling power cuts.
The banking institution is among the country’s big-six banking groups, and it estimates that GDP in the final quarter of 2022 shrunk by 0.4%.
Nedbank says this following intensified rolling power cuts weighing on productivity and a technical recession is represented by two consecutive quarters of negative growth.
In 2023, the bank expects the South African economy to grow by a meagre 0.4%, closer to the South African Reserve Bank’s (Sarb) growth projection of 0.3%. This is down from a previously forecast 0.7% growth.
MoneyWeb reports that In contrast, Nedbank expects growth for the full 2022 year to come in at 2.3%.
“On top of this, the hours per day without electricity increased dramatically, with 51% of Q4 at load-shedding stages 3 to 6. These paralysing disruptions hurt output and sales in all industries while driving up production costs across the board,” Nedbank’s economic unit said on Monday.
The bank also said production in the mining and manufacturing sectors, which the South African economy heavily relies on, was hardest hit due to load shedding, with output declining over the quarter.
The country’s ailing power supply has grossly dampened productivity across many sectors of the economy, with load shedding having been implemented every day since the end of October last year.
“Elsewhere, the impact was less, but growth in services nonetheless slowed significantly over the quarter,” the bank said.
For the first quarter of 2023, the bank sees a further contraction in GDP of 04%.
“Greater predictability will allow industries to adjust their operations accordingly while adapting to off-grid measures of power generation. Even so, persistent and intensive power outages will continue to hurt output and drive operating costs sharply higher, eroding profits and forcing companies to seek savings elsewhere in their cost structures,” it added.
“Sadly, this could entail renewed restructuring, resulting in another wave of job losses in certain industries.”
“Redirecting freight from rail to road and to other ports is associated with sharply higher costs, significant delays, and other challenges. Mining has further been plagued by criminality, including attacks on miners, community unrest, and illegal mining.
“Despite the plans put in place by the government (Operation Vulindlela) to address these inefficiencies, it is unlikely to yield results or bring meaningful relief in 2023.”
The bank unit’s comments echo those of other banks and business leaders, including that of competitors such as Standard Bank and FirstRand.
