S&P Global late on Wednesday downgraded its outlook on South Africa to “stable” from “positive”, citing infrastructure constraints and the severe power crisis.

South Africa’s economy contracted more than expected in the last quarter of 2022, as an escalation in rolling power cuts contributed to most sectors from agriculture to mining shrinking, data showed this week.

The rating agency said economic growth in South Africa was facing increasing pressure due to infrastructure constraints, particularly from severe electricity shortages.

S&P affirmed South Africa’s “BB-/B” foreign currency sovereign credit ratings but warned that it could lower them if the government’s ongoing reforms to address the power crisis do not progress as planned.

It also revised down its real GDP growth forecast for 2023 to 1% from 1.5% previously, and said it expects growth to average 1.7% in 2024-2026. Real GDP growth was 2% in 2022, S&P said.

“Downside risks to this forecast remain prominent since South Africa has been unable to fully capitalise on the global upswing in commodity prices while continued electricity shortages signal a potentially difficult winter ahead,” it said.

National treasury said it acknowledged S&P’s decision and reiterated its commitment to reduce rolling power cuts, which have plagued households and businesses for well over a decade.

Read: Load shedding sends business confidence over a cliff

South Africa has had scheduled power cuts every day so far this year, after record power was shed from the grid in 2022 with outages lasting up to 10 hours a day. — Akriti Sharma and Bhargav Acharya, (c) 2023 Reuters