Eskom loadshedding compounds business confidence concerns

Eskom’s sudden announcement of stage 2 loadshedding from 5pm yesterday is likely to retain business confidence in contractionary territory even longer. Photo: File

Eskom’s sudden announcement of stage 2 loadshedding from 5pm yesterday is likely to retain business confidence in contractionary territory even longer. Photo: File

Published Mar 11, 2021

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JOHANNESBURG - ESKOM’S sudden announcement of stage 2 loadshedding from 5pm yesterday is likely to retain business confidence in contractionary territory even longer.

The power utility said it would implement power cuts until 11pm on Friday as its generation capacity was severely constrained.

Eskom did not rule out the probability that loadshedding may continue throughout the weekend, saying that it faced breakdowns and delays in returning some units to service.

Loadshedding, albeit less pronounced, was cited as one of the reasons for business confidence remaining in contractionary territory in the first quarter of 2021.

The RMB/BER business confidence index (BCI) fell from 40 points to 35 points in the first quarter of 2021, in spite of the easing of lockdown restrictions.

The BCI, conducted by the Bureau for Economic Research (BER) on behalf of Rand Merchant Bank (RMB), continued to highlight the fragility of the economic recovery as it remained below the 50-point mark that separates contraction from expansion. However, at 35 points the RMB/BER BCI was a good 30 points higher than the slump to an all-time low of 5 points seen during the height of the lockdown in the second quarter of last year.

RMB chief economist Ettienne le Roux said it would not take much to blow the recovery off course.

Le Roux said a significant third wave of Covid-19 infections and power outages intensifying again later in the year had the potential to derail any expected rebound. “Such underlying dynamics are not reflective of a robust economic upswing,” he said.

“Against such an uncertain backdrop, the best contribution the government can make is to fulfil its promises of confidence-inspiring economic reform focused on the private sector becoming the key driver of GDP growth.”

The first quarter survey covered about 1 300 business people mainly during the second half of February when level 3 lockdown restrictions had been lifted.

RMB said confidence fell across all five sectors of the index, with retail experiencing the biggest decline, due to weaker-than-expected Black Friday and festive sales.

Investec chief economist Annabel Bishop lamented the lack of reforms and the reassessment of the regulatory environment to boost business activity.

Bishop said the inefficiencies in the economy had not been resolved to any meaningful degree to substantially change the ease of doing business.

“There has been instead more layers of bureaucratic involvement in the regulatory environment as more task forces have been formed to ‘deal’ with regulatory reform,” Bishop said.

“Business confidence is also weak as meaningful progress on eliminating corruption and successfully prosecuting the key figures is lacking.”

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