Economy Dampened as Load Shedding Impact Lowers

According to Professor Waldo Krugell, an economist at the University of Northwest, the main reason the impact of load shedding in South Africa is lowering is because households and businesses are moving away from Eskom’s grid supply.

Krugell’s comments came in reaction to the Reserve Bank’s announcement that it expects load shedding to have a smaller impact on the economy going forward. The central bank’s governor, Lesetja Kganyago, stated this during Wednesday’s repo rate decision.

“Whether its rooftop solar, cellular or other sorts of renewable energy, that is the main reason we become insulated from the impact of load shedding by spending a lot of money ourselves,” explained Krugell, referring to the shift towards alternative energy sources by consumers and businesses.

On the repo rate being kept unchanged, Krugell cited concerns over inflation trends as a likely factor. “I think the policy committee worries that there might be renewed upward pressure on prices, that is why they can’t lower interest rates yet and they have to wait a bit and keep it unchanged,” he said.

While acknowledging that food inflation has slowed, Krugell warned that grocery prices remain high. He also pointed to potential upward pressure on food prices due to the anticipated El Niño and drought conditions, which could impact crops like soybeans and sunflower oil.

Krugell painted a gloomy picture of the country’s economic outlook, citing the negative impact of high prices and interest rates on households. “That side of the economy is struggling due to high prices and high interest rates,” he stated, pointing to declining consumer confidence, new car sales, and retail sales as indicators.

As South Africa grapples with the persistent challenges of load shedding and inflationary pressures, the economist’s assessment highlights the complex interplay of factors shaping the nation’s economic trajectory.