South Africa’s rand weakened early on Tuesday after President Cyril Ramaphosa appointed a new electricity minister to try to solve the country’s worst power cuts on record and added other allies to the cabinet ahead of elections next year.
Ramaphosa on Monday appointed Kgosientsho Ramokgopa, a 48-year-old civil engineer and former mayor of Pretoria, to the new portfolio.
South Africa’s economic activity as measured by GDP growth fell 1.3% in the last quarter of 2022, dropping below its pre-pandemic level due to record power cuts, official figures showed on Tuesday.
“After recovering in the third quarter of 2022, South Africa’s GDP fell by 1.3% in the fourth quarter” from the previous quarter, state statistics agency StatSA said, adding that GDP (gross domestic product) “fell below its pre-pandemic levels”.
Economists had not expected the drop in GDP to be so sharp. Foreign trade and the financial sector were the biggest drags on growth, with exports falling by 4.8%.
Agriculture, mining, and manufacturing also dragged down activity. In the third quarter, GDP expanded by 1.6% in seasonally adjusted terms.
Growth in Africa’s most industrialised country suffered from a previously unseen level of power cuts. There were 207 days of outages in 2022 compared to 75 in 2021. “This figure is obviously a shock,” said economist Carmen Nel of Matrix Fund Managers.
State-owned Eskom, which supplies 90% of South Africa’s electricity, cannot keep up with demand. Most of its power stations are over forty-five years old and frequently break down. This causes power cuts of up to twelve hours a day, at a daily cost of more than $50 million, according to estimates by the energy minister.
The country’s economic growth has been slowing down for about two years. From 2.5% in 2022, it would fall to just 0.3% in 2023, due to insufficient electricity supply, according to the central bank’s forecast.
The energy crisis has forced South African President Cyril Ramaphosa to declare a state of national disaster and appoint a minister in charge of electricity.
The government’s benchmark 2030 bond was stronger in early deals, with the yield down 1.5 basis points to 10.125%.