6/30/2008

South Africa's economy

Power cuts and lower consumer demand will mean less growth

South African growth is already being affected by electricity shortages and a slowdown in consumer demand. The annual figure may fall below 4% for the first time in five years.

Power shortages and continued interest rate rises are beginning to affect economic growth. According to the latest figures from Statistics South Africa the economy grew by just 2.1% in the first three months of 2008--less than half the rate of the previous quarter (5.3%) and the lowest quarterly rate in six years. Power cuts had a substantial impact, unsurprisingly given that they are estimated to have cost the economy some R50bn (US$6.5bn) between November 2007 and January 2008 alone. The mining industry has been particularly hard-hit: following late-January blackouts, state energy utility Eskom cut supplies to 90% of normal levels. However, this is insufficient to maintain output, as the bulk of power used by mines is to keep pits functioning (including ventilation and drainage) rather than producing. Although power supplies to mines were subsequently raised to 95% of normal levels, mining production fell by 22.1% in January-March, declining to its lowest level in 40 years. ...



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