AFRICA OUTLOOK

By Royce Lowe

South Africa’s Ongoing Problem

Bloomberg reports that South African factory managers are downbeat as sales orders slump. There is a gauge that measures expected business conditions six months hence, and it rose to 49.8 in early May from 48.1 in March. Despite this improvement, this index failed to edge back above the neutral 50-point mark as business activity and new sales orders worsened relative to March.

The headline PMI would have deteriorated further if not for a significant improvement in the inventories index. The underlying survey results suggest that the manufacturing sector in South Africa experienced another tough month. The major problem, as reported here earlier, is South Africa’s state-owned utility Eskom Holdings SOC Ltd, which implemented rolling blackouts, locally known as load-shedding, on more than 200 days in 2022, and almost every day so far in 2023. These outages, which are needed to protect the grid from collapse when Eskom cannot meet demand, are curbing activity and demand in Africa’s most industrialized economy.

There is rampant corruption at Eskom. Coal theft to the tune of 1 billion Rand, or $55 million per month, is estimated, together with damage to infrastructure. The president of South Africa has called in the National Defense Force in an effort to limit infrastructure damage.

South Africa’s High Court recently ruled that all government hospitals and clinics, state schools, and the country’s police buildings should be spared from power cuts. Public Enterprises

Minister Pravin Gordhan must “take all reasonable steps within 60 days” to prevent interruption of electricity supply due to rotational blackouts implemented by state-owned utility Eskom, according to a ruling by three judges from the court in Pretoria. It seems that South Africa is in dire need of something much more drastic and effective than rulings. However, the level of corruption within Eskom discourages investment so the utility can be improved. It is a Catch-22 until either the utility cleans house or is taken over by another entity that can clean house. Neither solution appears to be active.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n