Stagflation will inevitably detract from investor and business sentiment, says assurance, advisory and tax services company PwC South Africa in its June 2023 'South Africa Economic Outlook'.

However, PwC expects the economy to grow by 1% in 2024, based on the premise that South Africa will see a turning point in the extent of loadshedding this year.

“The private investment currently seen and planned in alternative electricity supply is significant. Operation Vulindlela is tracking a pipeline of 10 000 MW in private sector energy generation projects, up from 4 000 MW reported one year ago.

"The positive impact this will have on power supply in the country and on individual business operations makes for a more positive economic growth outlook for 2024,” it said.

In May, the South African Reserve Bank (SARB) said it expected 280 days of loadshedding this year and warned that power cuts would reduce real gross domestic product (GDP) growth this year by two percentage points.

Further, the Bureau for Economic Research noted in June that the challenging business environment at present was not conducive to growth in non-energy capital expenditure or meaningful employment creation. This, in turn, hurts the country's long-term productivity.

“Our baseline view is for real GDP growth of only 0.3% this year. The outlook for 2024 is somewhat better, if private energy investment results in less frequent loadshedding. We expect the economy to grow by 0.9% next year or as high as 1.3% under an upside scenario,” said PwC South Africa chief economist Lullu Krugel.

This energy investment will bring with it more green jobs. As the world transitions to net zero, the role of traditional jobs is changing, and green jobs are growing at a significant pace.

The greening of the South African economy has the potential to create 460 000 new direct jobs by 2025, according to a report released in 2022 by the Industrial Development Corporation, Development Bank of Southern Africa, and Trade and Industrial Policy Strategies.

However, the transition to a green economy requires organisations to take a proactive and intentional approach to developing a green workforce. Upskilling will require cost and investment, but also bring economic benefits to people and communities, as well. It allows people to move to new jobs that are better and more future-proof and helps preserve a nation’s taxation revenues and reduces social safety net expenses, PwC said in its report.

There are three main categories of green jobs, including green new and emerging, which is the transition to a sustainable economy leading to the creation of new jobs with unique tasks and demands, and green enhanced skills, which is the transition to a sustainable economy significantly changing the tasks, skills and knowledge requirements.

Similarly, the green increased demand category is the transition to a sustainable economy leading to increased demand for these occupations, but greening has significantly changed the tasks or demand for workers. Such work supports a green business but is indirectly considered green because it does not involve green tasks.

“Upskilling is about more than just providing access to training. It is about identifying the knowledge, skills and experience that will be most valuable in the future for new and transformed roles. It is also about developing an effective way to support and inspire people to take action today and continue to adapt in the future,” said PwC South Africa senior economist Christie Viljoen.

“This requires understanding evolving skills gaps and mismatches, creating the right employee experience and buy-in to unleash energy for change, and developing engaging skills-development programmes, and driving return on investment with appropriate learning organisation and technology,” he said.

However, there is also a strong inclination in South Africa towards investing in upskilling the workforce in priority areas. This aligns with the notion that, by upskilling people to have the right skills, companies can unlock value and opportunities, PwC said in its report.

By developing the capabilities and expertise of their employees, companies in South Africa can position themselves to develop new products/services or raise prices for enhanced skills.

A PwC survey revealed that 79% of CEOs in South Africa are planning to invest in upskilling their workforce in priority areas, which is higher than the global average of 72%. This indicates a recognition of the importance of investing in human capital and nurturing the skills needed to drive innovation, growth and competitiveness.

Meanwhile, the local food value chain is being disrupted both in terms of supply and cost. The real risk is that retailers are not able to consistently source food supplies to supply communities at affordable prices, PwC South Africa said.

Food and beverage inflation surged to a 14-year high as loadshedding disrupted the food value chain.

The adverse impacts can be felt in agriculture, for example, where poultry farmers are struggling to access enough electricity daily to achieve optimal output. Retailers, at the other end of the value chain, spend billions of rands on diesel generators to keep fridges cool. This, in turn, divests their investment spending away from opening new outlets.

Some components of the food value chain are also experiencing a decline in water availability owing to the often-interrupted power needs of such systems.

Food and beverage inflation measured 12% year-on-year in May, with the staple bread and cereals category being 18.1% more expensive year-on-year.

The cost of imported food was a notable factor, with grain mill products 34.9% higher year-on-year in April. Inflation is elevated in all of South Africa’s key trading partners. For example, the PwC UK Inflation Tracker showed that cost inflation on food and beverages increased to 18.3% year-on-year in May.

Meanwhile, PwC South Africa expects inflation to average 6.1% this year, which is 0.8 percentage points down from the 2022 mean. The SARB estimates that load-shedding is adding 0.5 percentage points to inflation this year, largely owing to the costs incurred by businesses to keep the lights on. This has resulted in more interest rate hikes than would have normally been expected, were electricity supply more reliable.

“South African consumers have experienced additional financial strain in the form of more expensive credit owing to the electricity situation.

“However, we believe interest rates have peaked. With inflation slowing and likely to drop to 5.5% year-on-year by year-end, the SARB is on its way to achieving the real, inflation-adjusted, repo rate of 2.5% it desires,” said Krugel.