South Africa’s National Treasury said on Saturday electricity supply constraints were getting government attention at the highest level after rating agency Fitch said an unstable power supply had led it to cut growth forecasts.
Fitch affirmed its BBB rating but warned that the negative outlook for Africa’s most advanced but ailing economy reflected a range of risk factors. Print Send to Friend .
These included weak GDP growth and a failure to reduce the budget deficit and stabilise the government debt/GDP ratio “that may, individually or collectively, result in a downgrade”.
“Government recognises that the country’s economic growth performance needs to be higher in order to address the country’s challenges,” the treasury department said in statement. “Resolving the energy challenge is a priority”.
South Africa is building three large-scale power stations to reduce chronic electricity shortages that have forced power utility Eskom to impose rolling blackouts to prevent the grid from collapsing.
One of them, Medupi, produced power for the first time earlier this year from one of its six units. Once completed the plant will add nearly 5 000 MW to the country’s total generating capacity of 40 000 MW. Fitch had warned in March that a downgrade of its BBB rating for South Africa — two notches above junk status — was more likely than not.
It cited concerns that South Africa’s economy was running quite large twin budget and current account deficits, leading to rising public and external debt ratios. The treasury department said it would broadly stick to its spending ceiling budget plans of 3.9% of GDP for the 2015/16 fiscal year.
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