Standard and Poor’s Global Ratings downgraded its outlook on South Africa to stable from positive, citing severe rolling blackouts.
The rating agency says South Africa’s constraints on infrastructure and electricity supply could affect its economic growth.
S&P has kept South Africa’s currency debt rating unchanged at sub-investment grade but has warned that it could be lowered further if the government’s ongoing reforms to address the power crisis do not progress as planned.
The National Treasury says to address concerns raised by S&P it is taking urgent measures to reduce load shedding and transform the sector to achieve energy security.
In a statement, the Treasury says steps include improving the performance of the country’s freight rail transport.
Government says fiscal consolidation measures adopted will go a long way to ensure that public finances can absorb a portion of Eskom’s debt and maintain support for the most vulnerable and increase resources to fight crime and corruption.
South Africa’s economic growth figures for the fourth quarter of 2022 that came out this week was worse than expected with a 1.3 percent contraction.
This year the economy is projected to record a marginal growth of 0.4 percent.
VIDEO | Economy contracts by 1.3% in Quarter 4:
Contributions to the decrease in the fourth quarter of 2022 came from the mining, agriculture and manufacturing industries.
The statistical body further notes a slowdown in economic activities in the finance, real estate and business services industries.
The data indicates that the economy grew by two percent for the full year of 2022.
A chief economist at Investec, Annabel Bishop, says economic growth in 2023 is expected to be flat due to the ongoing energy crisis.
Bishop says, “We think growth will come out at 0.5% in 2023, we have a year ahead of severe load shedding which will damage economic activity in South Africa and of course as well economic growth forecasts have been revised down since the start of the year.”
“Early January expected economic growth to be 1.1% now we’re expecting it to be 0.6% and unfortunately much will depend on the stages of load shedding that South Africa sees averaging for this year in terms of what happens for the economic outcome.”