South Africa's industrial activity slows as electricity woes hurt recovery

10th June 2021 By: Reuters

South Africa's monthly manufacturing output contracted in April and mining production slowed, as electricity outages hit the strong recovery in economic activity seen earlier in the year.

Factory production was down 1.2% month on month in April, with a majority of sectors contracting. Mining activity grew by a meagre 0.3% from March's levels.

Africa's most advanced economy shrank by a record 7% in 2020 as the Covid-19 pandemic and related lockdowns forced a halt to activity.

However the easing of lockdown restrictions since late last year and an upswing in global commodity prices saw a consensus-beating first quarter GDP expansion of 4.6%.

Although year-on-year manufacturing growth was a record 87.9% in April, while mining jumped 117.9%, statisticians said this was due to base effects, with the comparative 2020 figures compressed by the impact of the pandemic.

Ailing state firm Eskom deepened nationwide electricity outages this week as its ageing coal-fired power stations suffered more breakdowns.

The scheduled power cuts, known locally as load shedding, began earlier in the year and are expected to particularly hurt manufacturing and mining, along with the trade and consumer sectors.

"The resumption of load shedding and uncertain legislative framework poses imminent downside risks," said Nedbank analysts Nicky Weimar and Candice Reddy, referring to strict licensing requirements on independent power generation, empowerment equity laws for mining firms, and other longstanding legal log jams.

"Furthermore, a worsening of the Covid-19 situation and the associated restrictions on economic activity remains a threat to the pace of recovery."

South Africa, which has recorded more than 1.6 million confirmed Covid-19 infections, has seen cases climb in recent weeks, with a jump of nearly 9,000 on Wednesday alone.