Recently published research from Business Monitor International, "South Africa Power Report Q4 2012", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 01/03/2013 -- BMI View: The latest monthly electricity indicators reported by Stats SA evidence that BMI's relatively bearish outlook for South Africa's power sector in 2012 has fully materialised, with the total volume of electricity available for distribution down 2.74% year-on-year (y-o-y) in H112. This trend is largely a reflection of steady but tepid headline economic growth, as well as various external headwinds.
Accounting for both political and economic developments, we thus believe that risks will be weighted to the downside in the coming months. That said, relatively positive demographic and economic fundamentals, together with some big-ticket projects that are under construction or in the pipeline, support a cautiously optimistic outlook in the medium-to-long term.
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As predicted over previous quarters, a combination of self-reinforcing domestic and global headwinds is hindering the potential of the South African power market this year:
- The latest data from the South African Reserve Bank (SARB) has reinforced our Country Risk team's view that South Africa will see tepid growth over the medium term, forecasting that real GDP will expand by 2.5% in 2012 and 3.3% in 2013, with risks weighted to the downside.
- The temperature in the political environment is running high in the run-up to the ANC elections in December 2012. The so-called 'Marikana Massacre' is weighing heavily on investor sentiment. Furthermore, the incident and the subsequent handling thereof has undoubtedly put a dent in support for Zuma, fuelling policy uncertainty.
- Although the outlook for domestic growth is weak, the upside risks to inflation stemming from food prices and union wage bargaining remain pertinent, curtailing the scope for a much needed raise in power tariffs. A point evidenced by the fact that state power group Eskom had to reduce the power tariff increase due in April by almost 10 percentage points, and forced the company to propose a new five-year plan in September 2012.
- Cumbersome bureaucracy presents an additional potential stumbling block for many multibillion dollar power projects that are in the pipeline and in need of external financing.
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