Business

Bank of America warns of Eskom threat to the country’s growth

By Siphelele Dludla 8m in the past

Share this text:



JOHANNESBURG – THE BANK OF America (BofA) has warned that the ongoing power disaster constituted the most critical dangers to South Africa’s financial outlook in the medium time period.

BofA yesterday stated Eskom’s electrical energy provide challenges may delay the country’s financial rebound in the subsequent three years in spite of a sooner recovery anticipated in 2021. The financial institution stated its outlook forward was of a 3.5 p.c consensus growth this year.

BofA raised its 2021 gross home product (GDP) growth forecast to 3.8 p.c from 2.9 p.c whereas sustaining its outlook for 2022 at 2 p.c.

BofA’s head of South Africa analysis Paul Steegers stated they had been cautiously optimistic about South Africa’s output this year, however medium-term outlook was confronted with headwinds. “Despite the upgrade, we acknowledge a number of risks to the outlook. The electricity constraints pose a main risk to the growth recovery,” Steegers stated.

“Eskom loadshedding has continued with the year-to-date energy availability factor at 58.6 percent from 65 percent last year. This is expected to continue at least till September.”

Eskom stated this month that there could be a shortfall in the provide of electrical energy of roughly 4 000 megawatts (MW) in the subsequent 5 years.

The energy utility was final month granted permission to improve the rate of electrical energy tariffs by an enormous 15.63 p.c from April 1 after the High Court Gauteng Division ordered that an quantity of R10 billion be added to its allowable income to be recovered from tariff prospects in 2021/22 monetary year.

BofA stated its optimistic GDP outlook mirrored world growth and commodity revisions; easing home restrictions and a greater 2020 fourth quarter print. Steegers stated growth was possible to return to pre-Covid ranges by late 2023, and even 2024.

“Output is only likely to return to pre-Covid levels by late 2023 with risks from electricity shortages, a weak jobs recovery, slow reforms and vaccine/ third wave concerns,” Steegers stated.

BofA’s sub-Saharan African economist Rukayat Yusuf stated the delays in Eskom’s infrastructure initiatives equivalent to Medupi and Kusile energy stations had been additionally key dangers to the outlook.

Yusuf stated worldwide traders had been hoping to see progress on emergency procurement, easing self-generation licence necessities and the unbundling of Eskom.

“We have seen some progress on this in the recent weeks but there is still quite a bit of concern, especially on the costs of independent power purchases that have been announced,” Yusuf stated.

“We estimate that the 2 000MW of emergency IPP capacity will cost 18 percent more than the 2021 financial year tariffs. This implies pressure on households in the longer term.”

[email protected]

BUSINESS REPORT



Back to top button