Power cuts could send SA's wobbling economy into a 'death spiral'

02 December 2018 - 00:00 By Katherine Child and ASHA SPECKMAN
Eskom debt likely to increase to R600bn in the next three years.
Eskom debt likely to increase to R600bn in the next three years.
Image: Business Times

Experts have warned that SA should brace for several years of power cuts, which could drag the country into a “death spiral”.

Among the implications would be Moody’s ratings agency downgrading SA to junk status, investment drying up and many small businesses closing.

“We can’t escape from state capture and the Zuma era — we are only now starting to realise what the longer-term implications are, and they are not favourable,” said Econometrix chief economist Azar Jammine.

“The growth forecasts for SA now are the second-worst among the G20 countries.”

With Eskom debt likely to increase to R600bn in the next three years, economist Mike Schussler called the situation “a nightmare for SA”.

“We have to do something drastic. We are at the edge of a cliff.”

Business Unity SA head Tanya Cohen said Eskom was in a Catch-22. If it kept raising prices to cover debt it would enter a “death spiral”, an actuarial term for increasing prices resulting in fewer customers, leading to even higher prices and even fewer consumers.

Read the full story in the Sunday Times.


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