Fitch acknowledges progress in stabilising electricity supply

Although Fitch has cited the constrained electricity supply as a restriction to economic growth in South Africa‚ they do also acknowledge that there is visible progress made towards stabilising the electricity supply through maintenance management and additional renewable energy that has been added to the national grid‚ Eskom says.

Fitch Ratings on Wednesday affirmed South Africa’s Long-Term Foreign and Local-Currency Issuer Default ratings at BBB- and BBB‚ respectively. The country’s Outlook remains stable.

In its statement Fitch said: “Trend GDP growth remains low compared to that of its peers‚ with five-year average GDP growth at just 2.2% compared to a ‘BBB’ median of 3.3%. GDP growth was 1.2% in 2015 and is likely to slow to just 0.7% in 2016 before recovering to 1.5% in 2017.

“Growth is held back by constrained electricity supply‚ concerns about the deteriorating investment climate and fractious labour relations. The government has made progress in addressing power supply problems‚ with no load shedding so far this year‚ as maintenance management has improved and additional renewable power sources have been added to the grid‚ although new units from the Kusile and Medupi coal-fired power stations will only come on line in 2018.”

Commenting on the decision by Fitch to affirm the sovereign rating‚ Eskom’s Chief Financial Officer said: “We recognise that a reliable electricity supply is a prerequisite for the country’s economic growth and while we are ensuring that the supply remains unconstrained through our maintenance programme‚ we are also aggressively executing the capital build programme which will increase our generation capacity; these initiatives demonstrate Eskom’s commitment to supporting government’s efforts of fulfilling the country’s economic and social objectives.”