Johannesburg — South Africa’s economy faces a serious risk of stagnation this year as the country’s electricity crisis continues to trigger widespread power cuts, the International Monetary Fund (IMF) has warned.
In January, the South African Reserve Bank projected a modest GDP growth of 0.3% for 2023, down sharply from 2% in 2022. However, the IMF’s latest findings following a mission to the country suggest that the short-term outlook for Africa’s most industrialized economy has worsened.
“South Africa’s economic and social challenges are mounting, posing a risk of stagnation amid an unprecedented energy crisis,” the IMF said in its statement.
According to the fund, real GDP growth is expected to slow to just 0.1% in 2023, mainly due to a significant increase in the intensity of nationwide power cuts.
The economy contracted by 1.3% in the final quarter of 2022, and another contraction in the first quarter of 2023 could officially plunge the country into recession.
South Africa’s electricity woes have deepened since last year, with scheduled load shedding lasting up to 12 hours a day. State-owned power utility Eskom continues to struggle to generate sufficient electricity for the nation’s 60 million citizens, hampered by ageing infrastructure and years of poor maintenance.
According to estimates from the Department of Energy, the outages are costing the country more than $50 million in lost production every day.
“Treasury is aware of most of the risks to economic growth and is working on measures to address them,” the department said in a statement.
The IMF’s warning adds to growing concerns about South Africa’s ability to revive growth and attract investment as the ongoing energy crisis weighs heavily on industries, businesses, and households across the nation.
