Torrential Rains Knock South Africa Economy Battling Strikes

Heavy rain in South Africa’s capital, the neighboring main financial hub of Johannesburg and in the east of the country may further damage an economy weakened by labor strikes, high unemployment and power outages.

Pretoria, the seat of government, is experiencing its wettest March for 17 years, while Johannesburg, the nation’s biggest city 50 kilometers (31 miles) to the south, has in less than two weeks had more than double the usual average for the month, according to South African Weather Service. That’s led to flooding that’s caused the deaths of at least 11 people, washed away shacks in shanty towns and opened up sinkholes on city roads.

“The flood damage is, in quite a number of ways, quite negative,” Johan van den Heever, head of economic reviews and statistics at the nation’s central bank, said at a briefing in Pretoria yesterday. “One can see great expenditures having to be incurred in the next couple of quarters, perhaps, to revive elements of the infrastructure which has fallen behind through this.”

Downpours in South Africa’s northeastern provinces caused Eskom Holdings SOC Ltd., the state-owned utility that generates 95 percent of the country’s electricity, to declare an emergency and enforce rolling blackouts last week because wet coal affected production at power plants. The flood gates at the Vaal Dam, the nation’s second biggest by area and situated south of Johannesburg, were opened for the first time in three years, the Department of Water Affairs said.

Move Money

Strikes at mines and carplants last year curbed growth in Africa’s largest economy to 1.9 percent last year, the slowest pace since a 2009 recession. Workers at the world’s three-biggest platinum producers have been on strike for higher pay since Jan. 23. The rand has gained 0.4 percent against the dollar this month and was trading at 10.7146 by 4:19 p.m. in Johannesburg.

The government will probably need to reallocate funds to repair damage caused by the extreme weather, Christie Viljoen, an economist at NKC Independent Economists, said by phone yesterday from Paarl, near Cape Town.

“For example, if they were going to build a road, they’ll now use that money to repair a dam,” Viljoen said. “This won’t lead to increased infrastructure spending, they’ll just have to move around some money or stop maintenance in another areas to fix these things.”

Johannesburg had 113 millimeters (4.5 inches) of rain in the first ten days of March, the weather service said by e-mail. That compares with a long-term average of 101 millimeters for the month. Pretoria received 190 millimeters, the most since 1997 when 383.1 millimeters of rain fell over the whole month.

Certainly Unusual

The rolling blackouts were the first in six years and caused stores and factories to shut, while flights were delayed.

“We’re not out of the woods yet, the rain continues,” Eskom Chief Executive Officer Brian Dames told reporters in Johannesburg two days ago. The power utility isn’t able to shield all of its coal, which is used to generate more than 80 percent of electricity, he said.

Lost revenue in the construction industry because of rain delays is estimated at 50 million rand ($4.6 million) to 100 million rand a day, according to Norman Milne, president of the South African Forum of Civil Engineering Contractors.

“It can certainly be considered unusual,” he said in an e-mailed response to questions yesterday. “Limpopo, Gauteng, North West, Mpumalanga, KwaZulu-Natal and parts of the Free State have been particularly hard-hit.”

Network Faults

The freight unit of Transnet SOC Ltd., the state rail and ports company, said about 10 percent of its train schedule was affected by the weather conditions because of washaways and temporary closures.

“The impact is spread among business units’ like timber, steel, cement, imported coking coal, magnetite,” Mike Asefovitz, senior communications manager, said in an e-mailed response to questions today. “The factories and mines have slowed production due to wet weather. Some product on rail wagons has become so wet that offloading is hindered.”

Santam Ltd. (SNT), South Africa’s largest property and casualty insurer, received claims from companies and individuals for damage to homes, buildings and vehicles, Fanus Coetzee, head of adjustment services, said in an e-mail yesterday, without giving details. Grain SA Chief Executive Officer Jannie de Villiers said in an e-mail floods will probably delay corn harvesting in the eastern Mpumalanga province.

Rail Washaways

Telkom SA SOC Ltd. (TKG), Africa’s largest fixed-line phone operator, said while its facilities have stand-by generators that can operate for as long as eight hours, its network is struggling.

“Telkom has experienced an increased volume of network-related faults caused by the adverse weather conditions,” the Pretoria-based company said in an e-mailed response to questions. “Flooding does cause faults but it also restricts workmen from accessing the fault zone, causing delays in repair times.”

A downpour in December 2010 in the northern provinces led to the Orange River, the country’s biggest, and the Vaal River, a tributary, overflowing and cutting short the annual raisin harvest in Northern Cape province. South Africa is the continent’s largest exporter of the dried fruit.

To contact the reporters on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net; Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net Nasreen Seria, Ana Monteiro

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