Fitch Ratings
Global financial information company Fitch Ratings has affirmed South Africa’s Long-Term Foreign and Local-Currency Issuer Default ratings at BBB- and BBB, respectively.

While Fitch Ratings asserted the country’s outlook remains stable, the company noted that constrained electricity supply is restricting South Africa’s economic growth.

Responding to the global credit rating agency, Eskom said that it is “aggressively executing the capital build programme which will increase our generation capacity.”

On Wednesday, in a 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.”

However the group noted: “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.”

Eskom responds to Fitch Ratings

Eskom’s chief financial officer commented: “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.”

1 COMMENT

  1. Fitch is correct and Eskom inhibited growth in SA already for more than five years. Just look at the power buy-backs of the past and the fact that large mines like Gamsberg cannot build a value-add refinery due to the lack of and high cost of electricity. In spite of this Government is always preaching value-add through beneficiation.