South Africa is facing its worst power outages on record and the issue is weighing heavily on economic activity into 2023.
Eskom, the state-owned utility company, said the country faces two more years of power cuts. The country’s Reserve Bank said last week it now expects the economy to grow by a meagre 0.3% this year. In November, it had forecast a 1.1% expansion.
Businesses throughout the continent’s most advanced economy all depend on Eskom as their main power source.
Meanwhile, the banking sector also has to face rising interest rates and higher inflation. Both could put pressure on asset quality as household resilience weakens, according to rating agency Fitch.
The biggest lenders in the country have had variable success in increasing their loan portfolio. FirstRand managed to increase gross total loans to $89.16bn in 2021, a level higher than 2019.
Absa Group increased total loans only slightly. Nedbank Group, which saw an increase in 2019 and 2020, went back to 2018 levels.
Investec South Africa decreased gross total loans only slightly in 2020 and has been increasing them since then.
“Credit growth has been slow, with wholesale growth rates ahead of retail growth rates, so from a credit view the local banks are well placed for a rise in interest rates,” said Nedbank CEO Mike Brown in an interview.
