S&P downgrades South Africa’s economic outlook thanks to loadshedding

Loadshedding has caused financial rating agency S&P Global to downgrade South Africa’s fiscal outlook to "stable" from "positive," citing infrastructure constraints and a severe power crisis.  

An escalation in rolling power cuts contributed to the contraction of most sectors from agriculture to mining in the last quarter of 2022, as S&P Global downgraded its outlook on South Africa late Wednesday.  

This year, South Africa has experienced scheduled power cuts every day, following power outages that lasted up to 10 hours per day in 2022.  

Economic growth in South Africa is being constrained by infrastructure constraints, particularly electricity shortages, according to the rating agency.  

Despite confirming South Africa's BB-/B foreign currency sovereign credit rating, S&P cautioned that if ongoing reforms to deal with the power crisis fall short, the ratings could be lowered.  

The firm also revised its real GDP growth forecast for 2023 to 1 percent from 1.5 percent previously and expects growth to average 1.7 percent in 2024-2026. Real GDP growth was 2 percent in 2022, S&P said.  

"Downside risks to this forecast remain prominent since South Africa has been unable to fully capitalize on the global upswing in commodity prices while continued electricity shortages signal a potentially difficult winter ahead," it said.  

S&P's decision was acknowledged by the National Treasury, and the country reiterated its commitment to reducing rolling power cuts, which have plagued households and businesses for the past decade.