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Power crisis poses biggest risk to South Africa growth: IMF
Visitors are silhouetted against the logo of the International Monetary Fund at the main venue for the IMF and World Bank annual meeting in Tokyo, October 10, 2012. PHOTO BY REUTERS/Kim Kyung-Hoon
23/06/2015
JOHANNESBURG (Reuters) - South Africa's power supply crisis poses the biggest obstacle to growth, while state support to ailing utility Eskom and increased public sector wages may weigh on public finances, the International Monetary Fund said on Tuesday.
The global lending body singled out delays in easing electricity shortages, and to policy and regulatory uncertainties, as chief constraints to economic growth in Africa’s most developed economy.
"As the electricity crisis has deepened, only a muted recovery to 2 percent growth is expected in 2015-16," the IMF said in a report.
Treasury said government was addressing the electricity constraints by investing in power infrastructure, in a statement responding to the IMF's report.
The IMF praised the Treasury's efforts to narrow deficits, but also voiced concerns about the government's ability to reign in state expenditure in the face of escalating funding requirements by Eskom.
"Substantial fiscal risks stem from further support to Eskom," the body said. "And the envisaged nuclear power plants could entail a large public debt increase."
Government's financial package for Eskom includes a 23 billion rand injection to help the utility plug a funding gap of around 200 billion rand.
Eskom, battling strikes, technical delays and cost overruns to complete three power plants expected to add over 9,000MW to the grid, said early in June that a 60 billion rand loan from the state would be converted into equity, in order to fund projects by boosting its lending profile.
South Africa aims to build six new nuclear power plants by 2030 at an estimated cost of between 400 billion rand to 1 trillion rand ($33 billion to $82 billion).
On Tuesday, the energy regulator held a public hearing to consider the latest application by Eskom to hike tariffs by 9.5 percent.
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