The outlook for South Africa continues to remain gloomy, while the rest of the continent at large steams ahead towards sunnier skies.
This comes as the African Development Bank (AfDB) said this past week that Africa’s economic growth is set to edge upwards in 2023 and 2024 while closer to home, South Africa’s economy is about to nosedive.
According to the AfDB annual African Economic Outlook report, Africa’s gross domestic product (GDP) growth is projected to rise to 4% this year and 4.3% in 2024 after a 3.8% expansion last year.
The bank said that GDP growth was below the 4.8% that the continent experienced in 2021.
Growth in the continent’s southern region is projected to slow firmly to 1.6% in 2023 from 2.7% in the previous year.
The main culprit for this poor reading was the weak economic performance in South Africa, stemming from the worst energy crisis in history, that the country faces.
Embattled state-owned power utility, Eskom, has enforced rolling blackouts every day this past year in the form of load shedding.
The AfDB said it forecasts South Africa’s economy to grow by just 0.2% in 2023 and 1.5% next year.
And on Thursday, the South African Reserve Bank (SARB) hiked the repurchase rate once again in the country, in a bid to curb spiralling inflation.
The bank hiked the repurchase rate (repo rate) by 50 basis points from 7.75% to 8.25% per annum, meaning that the prime lending rate will now increase from 11.25% to 11.75% per annum.
The central bank has now hiked rates by 475 basis points of tightening since its hiking cycle began in November 2021.
The SARB revised its forecast for GDP growth slightly higher than in March, at 0.3%, while growth forecast for 2024 and 2025 remained unchanged at 1.0% and 1.1%, respectively.
SARB Governor Lesetja Kganyago said the cost of borrowing would increase even further on the back of deteriorating inflation outlook due to the weak exchange rate and the possibility of heightened power cuts.
Kganyago said energy and logistical constraints remained binding on growth outlook, limiting economic activity and increasing costs, with load shedding alone estimated to deduct 2 percentage points from growth this year.
“We’ve got a sick economy. It’s suffering from inflation. We’ve got to take the medication. The medication might be bitter, but if the patient does not take the medication, they will end up in surgery and in intensive care,” Kganyago said.
“Our task as the SARB, acting in accordance with our mandate that says we must preserve price stability in the interest of balanced and sustainable growth, (has) had to deal with this challenge.”
Reuters reported that AfDB President Akinwumi Adesina called for “cautious optimism” in the face of risks including high global interest rates and a strong dollar while the continuing war in Ukraine could worsen food insecurity and push up prices further.
No respite for South Africans
Andra Nel, the marketing brand manager at KFC South Africa, told Business Report, “By now most consumers would have seen the announcement from the MPC (Monetary Policy Committee) and the impact that it has on the economy and on consumer household budgets. The reality of it is that there’s no longer time to wait for others to intervene or to make a difference because we need to realise that the worst impact is on those that are without already, and now are going to have an even harder time to put food on the table.”
Nel further said, “If we consider that the reality is that consumer price inflation is now at 7% and that there’s a rise in South Africa headline inflation rate and it’s actually shaped by fuel electricity and food price inflation now - specifically food price inflation is revised up again and many families that are already taking turns to have a meal on the table that are struggling to make ends meet, will now be even more severely affected you can only imagine that the impact on basic meals like bread and maize will be significant.”
“We have to as South Africans now pull together and do the little bit that we can for society as large. As a country, that has always been held together by the spirit of ubuntu more than ever from KFC’s perspective we remain more committed than ever to making a difference through Add Hope and making sure that we help as many people as we can,” she further said.
Abigail Moyo, the spokesperson of the trade union Uasa, said that amid the current economic challenges, the union was deeply concerned about the affordability of essential items.
“Workers have been dumped into a survival crisis due to interest rate hikes and other increases that eat into their disposable income. Worse seems still to come. Economists say that if load shedding becomes more frequent and the MPC decides to increase the repo rate again later this year, it is very likely that the economy will shrink in 2023,” Moyo said.
“While the powers that be discuss our challenges ad infinitum, the sad reality is that workers must always be prepared and ready to adjust to worsening economic circumstances. More South Africans are suffering in poverty due to the cost of living, including load shedding, the aftermath of Covid-19, and high unemployment,“ Moyo further said.
BUSINESS REPORT