The Washington-based lender pointed to the usual suspects in its downgrade, citing power shortages, rising interest rates and a poor outlook for South Africa’s key trading partners. 

“Growth in South Africa is forecast to weaken further to 1.4% this year before picking up to a still sluggish 1.8% in 2024. Weak activity in major trading partners (China, the euro area, the United Kingdom, and the United States account for over 40% of exports), tight global financial conditions, political and policy uncertainty will constrain growth and widen external vulnerabilities,” the World Bank said. 

“Further domestic policy tightening is bound to temper domestic demand and investment, while high unemployment and worsening power cuts will also weigh on growth. Implementation of much-needed reforms to remove structural bottlenecks has remained slow.”

These forecasts were made before the energy shortage went from terrible to the current catastrophe. With rolling blackouts already at Stage 6 just a few days into the new year, don’t be surprised if the World Bank wields a panga to its 2023 forecast next time around. 

Indeed, a viable case could be made that its current forecasts are wildly optimistic and already out of date. The economy is, after all, just rebooting after the annual Christmas break, and it is high summer — we are just three weeks past the longest day of the year. 

If it’s Stage 6 now — which means 6,000 MW have to be taken off the grid to prevent its complete collapse and a blackout that would unleash a tidal wave of social unrest — what will happen when the economy is at full throttle, which it would normally return to in the coming days? Or what will happen as winter descends? 

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Almost nobody believes ANC promises that it has “a plan” to reduce rolling blackouts. The current scale of power cuts is a strong signal that there probably is no “plan”, or at least not one that is remotely viable, unless the plan is to shrink the economy to the size of Zambia’s. 

The World Bank has also cut its forecasts for gross domestic product for most countries and regions, and said fresh shocks could push the global economy — which it now sees expanding by 1.7% in 2023, almost half the rate forecast last June — into a recession. 

World Bank cuts 2023 forecasts and warns of global recession 

If a global recession does transpire and is combined with rolling blackouts that are already on pace to top the record power cuts of 2022, it’s hard to see how this economy can manage growth of 1.4% this year. 

The growth that it managed last year in the face of the blackout barrage was off a relatively low base, with pre-pandemic levels of output only just clawed back.

Global growth of 1.7% would be the third worst annual performance of the past three decades, and that overall forecast looks likely at this stage to be cut further. 

Only the contraction of 2009 during the global financial crisis, and that of 2020 under the weight of the “Great Lockdown”, were worse performances. 

“Our latest forecasts indicate a sharp, long-lasting slowdown, with global growth declining to 1.7% in 2023 from 3% expected just six months ago. The deterioration is broad-based: in virtually all regions of the world, per-capita income growth will be slower than it was during the decade before Covid-19,” the World Bank said. 

“Global growth is projected to decelerate sharply this year, to its third weakest pace in nearly three decades… This reflects synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from the Russian Federation’s invasion of Ukraine. 

“Investment growth in emerging market and developing economies is expected to remain below its average rate of the past two decades. Further adverse shocks could push the global economy into yet another recession,” it warned. 

There have been some economic green shoots of late in South Africa. 

New car sales data for 2022, a timidly rising Absa Purchasing Managers’ Index, and record levels scaled earlier this week on the JSE — seemingly defying the economic laws of gravity — are among them.  

But overall, the lights are dimming on a range of fronts for the South African economy, both figuratively and literally. DM/BM