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S. Africa Economy Under Threat

S. Africa Economy Under ThreatS. Africa Economy Under Threat

The BRIC nations – Brazil, India, China and Russia – once aimed to distance themselves from the economic woes of the West.

A few years ago, BRIC became BRICS with the addition of South Africa. But Africa’s second largest economy is not in good shape: the South African economy only grew 1.5 percent in 2014, its slowest pace since 2009. One factor was the labor strikes in the mining sector, but more recently, power cuts have become a serious issue, Aljazeera reported.

In fact, things looked so bad for the country’s largest power generator Eskom, the South African government had to provide a $2b bailout.

The financial services group Efficient believes the economy has lost $25bn since 2008 because of electricity shortages, or, put another way, one million jobs which are desperately needed in a country where unemployment is at 25 percent.

 There are concerns on how all this will impact South Africa’s National Development Plan, which is looking to spend $72b over the next three years on infrastructure.

 And on top of all that, South Africa’s debt status could be cut to junk by the ratings agencies and the finance minister needs to slash the country’s public-sector wage bill.

  Renewable Energy

South Africa’s hopes of becoming one of the world’s top renewable energy hubs are dimming due to poor infrastructure and delays as cash-strapped state utility Eskom is distracted by a scramble to keep the lights on.

Chronic electricity shortages are one of the biggest brakes on growth in Africa’s most developed economy as regular blackouts strangle industries from mining to manufacturing and pile pressure on President Jacob Zuma’s government.

Zuma laid out ambitious goals last month to increase power generation capacity, including plans to boost installed renewable energy capacity to 9,600 megawatts (MW) by 2030 from just 1,600 MW now, out of a total capacity of 44,175 MW.

Upgraded technology and lower costs have enhanced the appeal of clean energy in Africa, as firms such as Enel Green Power and E.ON eye the relatively untapped region to help offset lagging growth in mature European markets.

With year-round sunshine and thousands of miles of windswept coast in South Africa, investors are warming to the renewable energy potential, with 66 projects completed or underway since the government launched a first bid round four years ago.

Yet, developers are becoming impatient over delays and a lack of infrastructure to connect privately-run power stations (IPPs) to the national grid, with the risk that investors might switch to rival markets such as Mexico and Brazil.

“There is a growing sense of frustration among developers as we negotiate with Eskom and government on grid upgrades and how it is financed,” said Jack Zhao, deputy general manager for Africa at Goldwind, a Chinese wind turbine maker.

 

Financialtribune.com