Power cuts expected to hit South Africa’s GDP – Goldman Sachs

LONDON (Reuters) – Severe planned power cuts at South African state-run utility Eskom are expected to shave 0.3 percentage points off first-quarter GDP growth, Goldman Sachs said on Thursday.

The continent’s most industrialised economy has suffered from some of the worst power cuts in several years, presenting President Cyril Ramaphosa with a major challenge two months before an election at which he will try to reverse a decline in voter support for the African National Congress (ANC).

If the current intensity of the planned cuts, known as load-shedding, were to persist in 2019, it could subtract up to 0.9 percentage points from annual growth, Goldman analysts said in a note to clients.

In February South Africa’s national treasury estimated GDP growth of 1.7 percent in 2019.

Eskom supplies more than 90 percent of the power in South Africa but has suffered repeated faults at its coal-fired power stations, along with low water levels at hydroelectric plants and diesel shortages.

“Restoring a reliable supply of energy and ensuring that we have a sustainable model for affordable energy into the future is now one of our most urgent priorities,” Ramaphosa told a gathering at the 25th commemoration of Human Rights Day in Johannesburg on Thursday.

“We are already putting in place a number of measures and making sure that the energy loss that we’ve had from the cyclone in Mozambique should be restored,” he continued, adding that the government is also addressing maintenance challenges at power stations.

Eskom continued to implement rolling blackouts on Thursday with 4,000 megawatts cut from the grid on a rotational basis.

Reporting by Karin Strohecker; Additional reporting by Nqobile Dludla in Johannesburg; Editing by Helen Reid and David Goodman

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