This is according to Edward Parker, managing director and head of EMEA (Europe, the Middle East and Africa) ratings at Fitch, speaking at the National Development Plan discussion: A Plan in Motion.
“Growth is being thwarted by the lack of capacity to produce energy. That’s something that people have known about and been able to foresee for around a decade yet not sufficient action has been taken, and that will constrain growth over the next few years no matter what policies are being pursued,” he told CNBC Africa.
“It’s a very worrying situation.”
According to reports, state utility Eskom announced that it has moved into stage three of load-shedding nationwide due to losing generation capacity at five of its units across the country.
In addition, Parker explained that the economy is also suffering from labour strikes and uncertainty in its mineral resources legislation which hampers foreign investment, and ultimately damages the country’s international image.
“For all the positive stuff talked about in the NDP, there are also a lot of areas where there seems to be a lot of uncertainty in government policies which are holding back growth.”
Parker added however that the NDP remains a sound vision for the country as it recognises South Africa’s main problem of weak GDP growth.
“GDP growth in South Africa has averaged just 3.1 per cent over the last 10 years. That is the lowest out of the 20 countries that we (Fitch) rate in Africa. So not only does the NDP recognise its problems but it also provides some of the solutions,” he explained.
Parker said that numerous studies conducted by the International Monetary Fund and the World Bank shows that if government provides sound infrastructure, good education and liberalising structural reforms, the country will deliver stronger growth.
“Stronger growth is what South Africa needs at the moment in order to improve the economy and provide decent social conditions for the people as well.”
Bobby Godsell, national planning commissioner, added that the country has had its successes and should learn to build on that.
(READ MORE: Is Eskom’s load shedding becoming a crisis? )
“In South Africa, we’ve had an incredible story of going from zero renewable energy production to becoming the 10th largest producer worldwide of solar and wind power. The government allowed realistic pricing, efficiently administered tenders and we have invested 14 billion US dollars into it. The power is there,” he explained.
“This is an example of when [the country] got its act together. We need [to implement] this in the transport sector as well as renew coal-fired power stations, save the electricity grid and make the labour markets more flexible.”