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South African economy declines by 3.2 per cent in the first quarter3 minutes read

SA’s GDP contracted by 3.2 percent in the first three months of the year compared with the previous quarter

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South Africa’s economy declined sharply in the first quarter of 2019, the National Statistics Authority said Tuesday, piling pressure on President Cyril Ramaphosa’s newly elected administration. According to Stats SA, gross domestic product (GDP) for Africa’s most developed economy contracted by 3.2 percent in the first three months of the year compared with the previous quarter, the largest quarterly drop in about 10 years.

The slump came in contrast to 1.4 percent growth seen in the fourth quarter of 2018 and was far below the average 1.6 percent decline predicted by analysts. The slip was driven mainly by declines in the agriculture, manufacturing and mining sectors which reported drops of 13 percent, 8.8 percent and 10.8 percent respectively.

Depressing economic activity further was electricity rationing, infamously known as load-shedding. Cash-strapped power monopoly Eskom, which generates 90 percent of the nation’s energy, sporadically imposed the rotational power rationing in February, plunging swathes of the country into darkness for long hours and sparking public anger at the ANC-led government.

The head of the North West University’s Business School, Professor Raymond Parsons, said rolling electricity power cuts had been grossly underestimated as the main culprits in the first quarter and had “probably shaved about 0.6 percent off expected growth for this year.”

The weak economy coupled with low wage increases was reflected by a 12.7 percent drop in the amount South Africans spent on clothing and footwear. Exports fell 26.4 percent in the quarter, while imports were down by 4.8 percent.

Ramaphosa, who held onto office in May when the ANC party won the national election, has vowed to revive the economy by attracting $100 billion in foreign investment and by fighting corruption. South Africa’s economy grew by less than one percent last year and even slipped into a brief recession during the third quarter.

Parsons warned that the poor first quarter performance signalled a “higher risk of the South African economy drifting into a technical recession in the first half of 2019.” Main opposition Democratic Alliance leader Mmusi Maimane said the contraction was proof the country “continues to move backwards and there is a need for reform”.

South African main opposition party Democratic Alliance (DA) leader Mmusi Maimane
South African main opposition party Democratic Alliance (DA) leader Mmusi Maimane (L) arrives at the Independent Electoral Commission (IEC) Results Operations Centre on May 9, 2019 in Pretoria, South Africa. – South African President’s ruling ANC will retain its parliamentary majority after polls but with diminished support, complicating efforts to revive the embattled party and the country’s flagging economy, results showed on May 9, 2019. The African National Congress (ANC), in power since 1994, surged into the lead with nearly 57 percent after more than half the voting districts were officially tallied following May 8 vote. (Photo by Phill Magakoe / AFP)

Peregrine Treasury Solutions’ corporate manager Bianca Botes said it was “the biggest decline in GDP since the 2008 financial crisis” and a sign of the “dire state of the South African economy.” After the data was released, the rand weakened by as much as 1.32 percent against the dollar to 14.64 rands per dollar.

Ramaphosa is to deliver his State of the Nation address later this month as South Africans and investors focus on soaring fuel prices and stubbornly high unemployment.

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Ethiopia to divest 40% of Ethio Telecom

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The Ethiopian government is finalizing plans to sell a 40 percent stake in Ethio Telecom- the country’s sole telecommunication provider . The plan was announced by Ethiopia’s State Minister of Finance, Eyob Tekalign Tolina.

Ethiopia’s telecommunication industry is considered one of the last closed markets. It has been one of the government’s plans to liberalize the country’s economy launched by Prime Minister Abiy Ahmed. Ethio Telecom has a large market serving a population of around 110 million.

The government will retain ownership of the remaining 60 percent.

Foreign firms in the telecom sector will be invited to bid and a percentage of the minority stake will be sold to Ethiopian citizens. South Africa’s MTN and Kenya’s Safaricom have shown interest in expanding into Ethiopia in the past.

Ethiopia’s communications regulator says the country would proceed with the privatisation of the telecommunications sector despite the novel coronavirus outbreak.

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Zambia’s Zesco, Chinese firm enter $548 man deal

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Zesco Limited, Zambia’s state-owned electricity company, has signed contracts worth $548 million with Power China to develop three solar power plants that will add 600 megawatts (MW) to the national grid.

The three contracts are a step towards diversifying renewable energy for the country, which relies heavily on hydropower and has faced electricity shortages partly due to droughts.

“The three-grid solar PV projects will have a capacity of 200 MW each,” Zesco Managing Director, Victor Mundende said in the statement, adding that the power plants will boost access to electricity and enhance industrial development. A generating date is yet to be disclosed.

Zambia’s power supply deficit has grown by nearly 20% since September, State power utility, Zesco announced in March, despite hefty price hikes and the government’s fast-tracking of support for green energy projects. 

Zesco’s Director of Corporate Services Patrick Mwila said in March the electricity deficit had grown to 810 megawatts (MW) from a 690 MW gap in September last year. E

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Algeria to invest $3 billion in solar power, free up gas export

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The Coronavirus pandemic is proving to be the motivator for more economic diversification. An example of this, is Algeria’s plan to invest further in renewable energy and generate more electricity. The country intends to invest at least $3 billion dollars in this endeavor.

These new photovoltaic solar plants will generate a combined production capacity of 4000 mega watts (MW). The electricity will be consumed locally and excesses sold. The move will enable more gas to be sold externally.

Recently, Algeria lost its main gas supply destination due to cheaper alternatives with more supplies.

Currently, gas is used in generating about 98% of total electricity production in Algeria. But recent development has been encouraging Algiers to increase its exports of gas and crude oil, which are the main sources of Algeria’s revenue. Solar generated electricity makes up the remaining 2%.

Algeria’s Prime Minister, Abdelaziz Djerrad’s office announced the development on its website following a meeting of the government.

“In addition to meeting national demand for energy and preserving our fossil resources, this project will allow us to position ourselves on the international market,” it said in a statement.

It gave no details on where the electricity might be sold abroad or how much the proposed plants would contribute to domestic supply.

The COVID-19 pandemic and subsequent global movement restriction has influenced the drastic drop in crude oil and gas sales affecting countries like Algeria. The past two weeks has seen a gradual rise in price but Algeria like many other OPEC members have announced plans to seek foreign loans in 2020 for the first time in years to fund what they called “strategic projects”.

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