(Bloomberg) — The biggest risks to South Africa’s 2024 economic outlook may stem from electricity supply shortages, tensions over debt sustainability and erosion of the state’s legitimacy ahead of elections, according to Allianz SE. There is.
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The global financial services giant predicts South Africa's economy will grow by 1.4% this year, up from the expected 0.7% in 2023, with the lack of reliable electricity supply being the biggest drag on growth.
Africa's most industrialized country suffers near-daily power outages after years of neglect, corruption and mismanagement have left state power utility Eskom Holdings SOC unable to keep up with demand.
In its first Country Risk Atlas report, Allianz said power outages are preventing businesses, industries and households from realizing their potential, and that it is “unlikely that adequate electricity supply will be achieved within the next 12 months”. Ta.
debt sustainability
A worsening debt trajectory could also weigh on the country's economic outlook, Allianz said in a report assessing default risks in 84 major economies.
Allianz said: “Short-term absorption of revenue to service debt interest and rising sovereign bond yields result in South Africa ranking in the worst quintile of our public debt sustainability risk assessment at the end of 2023. ” he said.
The situation could worsen further due to increased financial demands for social programs and the peculiarities of state-owned enterprises ahead of elections, the report said.
Despite lower-than-expected tax revenues, government ministries and state-owned entities are insisting on increased spending. Their calls have grown louder as opinion polls show the ruling African National Congress could lose its majority for the first time since seizing power in 1994 in elections that need to be held by August.
President Cyril Ramaphosa has backed the popular R350 ($18.42) monthly social grant for unemployed workers introduced during the coronavirus pandemic, despite not budgeting for it beyond March 2025. He promised to extend and improve the program.
Finance Minister Enoch Godongwana is likely to provide more detailed information when he presents his annual budget on February 21.
legitimacy of the state
Allianz said the decline in national confidence is a further risk to the country's economic outlook.
The report said: “The worsening of conflicts between political elites and the associated increase in violent riots and insurrections are linked to a decline in the legitimacy of the state, the ability of the ruling ANC party to quell dissent, and the predictability of government actions. “This puts even more pressure on effectiveness.”
In July 2021, law enforcement struggled to quell a week of riots and looting that coincided with former president Jacob Zuma's arrest on contempt charges and widespread protests against poverty and coronavirus curbs. fueled by anger.
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