Outlook bleak as rand takes hammering

The rand has lost ground due to load shedding, Covid and the KwaZulu-Natal floods, and became the worst performing currency in the world recently as it lost 8.5% of its value against the US dollar.

Add to this the impact of higher inflation and the country’s economic outlook is not bright at all.

The return of stage 4 load shedding due to record unplanned breakdowns, the Covid test positivity rate reaching a three-month high and the disruptive effects of the flooding on economic activity are the main drivers behind the depressing economic outlook, according to PricewaterhouseCooper’s (PwC) report, South Africa Economic Outlook: the next challenge: salary and wage increases.

The aftermath of the flooding was devastating, with eThekwini reporting that most of its 1 152 formal businesses were affected, while data from the Google Community Mobility initiative indicates that workplace activity in KwaZulu Natal was 6% below the pre-pandemic level on 13 April, with the rest of the country 8% higher on average.

PwC says the disruption of business and consumer activity has a notable impact on the South African economy because KwaZulu-Natal is the second-largest provincial contributor to the national economy after Gauteng and employed 2.4 million workers at the end of last year.

eThekwini is a large contributor to the KwaZulu-Natal economy, accounting for more than half of the provincial GDP and providing jobs to 1.5 million people.

This, while the port of Durban is the largest harbour and busiest port in the country, handling 60% of total container traffic to and from South Africa.

Compared to the damage caused by the unrest in July 2021, when 300 bank and post office sites as well as 1 400 ATMs were affected, as well as 260 malls, this time the damage is much larger and more widespread, with destruction to both public and private infrastructure, PwC says.

The provincial government estimates an infrastructure repair bill of R17 billion so far, with transport, manufacturing and agriculture affected.

Transnet estimates it would take seven weeks to resume operations on its damaged main railway line between Durban and Cato Ridge, while Public Enterprises Minister Pravin Gordhan said last week that the port of Durban had a backlog of up to 9 000 containers that would take more than a week to clear.

Manufacturing is the largest economic sector in eThekwini and an important job creator.

Vehicle manufacturer Toyota, paper manufacturers Mondi and Sappi and Pioneer Foods are all firms that all had to temporarily close operations.