It confirms South Africa cannot expect more than about 1% growth for 2019 as a whole and perhaps even less. Load shedding and policy uncertainty were obviously underestimated as the main culprits in 1Q 2019, having shaved about 0.6% off expected growth for 2019.
As recent economic trends in 2Q 2019 have been mixed, including a less supportive global economy, there is now a higher risk of the South African economy drifting into a “technical recession” in 1H 2019. Business and consumer confidence remain at low levels and will need to be strengthened to drive economic recovery.
On the most favourable economic and political assumptions the outlook for growth next year could still now be about 1.6% whichremains well below what South Africa requires.
The most damaging impact of load shedding has been on capital formation as a key driver of renewed economic growth and employment. Successfully boosting investor confidence depends on a reliable and cost-effective supply of electricity to encourage the strong recovery in fixed investment which South Africa requires.