Loadshedding Stage Six to Come to South Africa, How Will This Affect Economy?

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Why is there Load Shedding in South Africa？

Currently, the power supplier, Eskom, is facing issues with the current infrastructure that is generating electricity and supplying it to homes. The infrastructure is said to be old and deteriorating. It needs a massive updating as the current facilities were not meant to power the number of people present in South Africa and it is also breaking apart little by little. There have been promises by the government to remedy the situation however most funding efforts have often led to corruption scandals and miss grossly paid Eskom executives. There has been a recent announcement whereby the government promised to invest.

This disruption in energy supply is detrimental to the economy as there are a number of businesses that are dependent on a constant supply of electricity. When this supply is halted, production is halted. This means that these businesses produce less and receive less profit, which in turn effecting the economy. Last few months South Africas GDP took a hit because of the massive power cuts. As winter subsided the cuts reduced and the load shedding status was reduced from level six to level one. However, there has been a resurgence in demand and Eskom is now announcing going back to level six.

We can expect that this will have the same impact on the economy as did previous power cuts, so we should expect to continue shorting the ZAR. This week the ZAR broke the 17.5 level and we should expect this movement to continue for a little longer at the very least. However, if you are planning to buy the rand now I think you best be careful as there are not too many positive economic indicators for South Africa at the moment.