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Power supply to cost SA GDP growth: S&P

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South Africa’s inconsistent electricity supply is expected to cost the country around 0.3 percent of gross domestic product (GDP) growth, ratings agency Standard & Poor’s (S&P) said on Monday.

“We saw 4th quarter as a fairly pleasant surprise after a fairly disappointing 2014,” chief economist for Europe, Middle East, and Africa Jean Michel-Six said.

“We would estimate that the electricity drag, the shortages… could take about 0.3 percent off of the rate of growth of the economy this year.”

There were some downside risks to this estimate, with S&P recognising that the situation could be worse than in their assessment baseline.

S&P estimated that GDP growth in South Africa for 2015 would be just over two percent.

Michel-Six suggested this figure would between 2.2 to 2.5 percent, after the electricity supply effects were considered.

In June last year, S&P lowered South Africa’s long-term foreign currency sovereign credit rating to BBB- from BBB.

“The downgrade reflects our expectation of lacklustre GDP growth in South Africa, against a backdrop of relatively high current account deficits, rising general government debt, and the potential volatility and cost of external financing,” it said in a statement at the time.

On February 25, Finance Minister Nhlanhla Nene said in his budget speech that electricity constraints were largely responsible for holding back growth and investment.

He said the first instalment of a R23 billion lifeline to Eskom would be paid in June, with two more to follow.

Real growth in non-interest spending will average 2.1 percent over the next three years and be more closely aligned to long-term average real GDP growth from 2017/18. SAPA


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