The devastating effect of load shedding, felt by consumers during the fourth quarter of 2022, is clearly visible, as Statistics South Africa announced that the economy had contracted by 1.3%.
This is according to Frank Blackmore, Lead Economist at KPMG.
Blackmore told Business Report that the rolling power cuts imposed by the ailing state power utility, Eskom and the severity of the various stages of load shedding and the number of days it went on for during the fourth quarter of 2022 were what led to the economy taking a hit.
“Seven industries recorded negative growth during the third and fourth quarters of 2022, which included agriculture, mining, manufacturing, electricity, trade, finance, government and a reduction in tax subsidies which all contributed to the contraction in GDP,” Blackmore said.
Stats SA figures showed the agriculture sector shrank 3.3% quarter on quarter, mining 3.2%, finance 2.3%, trade 2.1% and manufacturing 0.9%. The construction sector grew by 0.5%.
The data was worse than the third quarter's revised 1.8% growth in quarter-on-quarter and seasonally-adjusted terms.
Analysts had predicted a 0.4% contraction in October-December.
The largest contribution to the contraction was 0.6 percentage points by the financial sector.
“This leaves total growth for the year at two percentage points, after a total of 4.9% that we experienced earlier. It highlights the problem that we need to sort out, the energy crisis and the supply and consistency in order to get this economy back to decent growth rates,” he further said.
Blackmore painted a dark picture of the economy if load shedding persisted in the country.
He said: “There was a recent announcement by the South African Reserve Bank which estimated a two percentage point decrease in economic growth. If we continue with the current levels of load shedding for the foreseeable future, this emphasises the need to address both the management problems as well as the infrastructure investment required in order to add generation capacity to the grid. Otherwise, we can expect similar negative or close to negative growth rates for the country in the future.”
Andra Nel, Purpose Manager at KFC’s Add Hope, said South Africans would be reeling with the shock that the economy had shrunk.
“If you are struggling to put food on the table, it has a far-reaching impact on people and communities. We need to bear in mind that this impact will be felt by those who are really in need.”
Hayley Parry, Money Coach and Facilitator at 1Life’s Truth About Money, said: “It looks that there will be a lot more belt-tightening to come when it comes to consumer finances because it looks like we have some turbulence ahead. It feels like we are living inside a roller coaster as a South African, and our economy is reflecting the same. The contraction announced on Tuesday was far higher than what economists had predicted. This is not good news as they are already predicting that the current quarter that we are in is not looking good as well, thanks to the rolling blackouts that we as a country are facing.”
“The reality is that this is impacting every aspect of our lives, including the country’s business sector. The cost of producing goods and services is going to increase as businesses have to compensate for not having electricity and pay more for coming up with their own solutions to deal with the energy crisis. Those costs are, unfortunately, being passed on to the consumers,” Parry further said.
BUSINESS REPORT