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Newsdeck

South Africa Can Boost Growth If Power and Transport Issues Are Fixed, IMF Says

South Africa Can Boost Growth If Power and Transport Issues Are Fixed, IMF Says
Electrical power lines hang from transmission pylons outside Emalahleni, in Mpumalanga, South Africa, on Tuesday, Dec. 18, 2018. Companies such as power utility Eskom, South African Airways and the South African Broadcasting Corp. are reeling after repeated management and strategy bungles and have indicated they need state aid and staff cuts to survive.

South Africa could dramatically boost economic growth if the country fixed its fraying transport network and public electricity utility, the International Monetary Fund said.

“If all the structural things are tackled, we believe growth can go up to 2.5% to 3%,” Max Alier, the IMF’s resident representative to South Africa, told a Bloomberg event in Johannesburg on Tuesday.

South Africa grew 1.9% last year and activity will slip to just 0.3% in 2023, according to economists polled by Bloomberg, as electricity outages at troubled state utility Eskom Holdings SOC Ltd. and rail and port bottlenecks take their toll.

Read More: How South Africa’s Blackouts Went From Bad to Worse

The country’ central bank estimates that power cuts – known locally as loadshedding — alone shaved 3.2 percentage points from gross domestic product last year and will likely cut another two percentage points off growth in 2023.

Steps to improve the power situation – including relaxing restrictions on private power generation – could see growth next year advance to 1.7%, IMF forecasts show.

Given the public finance restraints faced by South Africa, Alier said the goal should be to remove obstacles to mobilize private sector capital.

“The public sector has very limited fiscal space to provide the needed resources,” he said. “You need to create the conditions for the private sector to be willing to put the investments in.”

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