Nene: Drought could hit growth, employment

The water shortage threatens the farming sector, which could fuel food prices and inflation.

Finance Minister Nhlanhla Nene. Picture: Reinart Toerien/EWN.

JOHANNESBURG - South Africa's water shortage could have a "serious impact" on food prices and ultimately knock growth, employment and revenues in the continent's most advanced economy, Finance Minister Nhlanhla Nene said on Saturday.

Nene also told Reuters in an interview on the sidelines of this weekend's G20 meeting in Turkey that state power company Eskom has "breathing space" before it needs to return to capital markets for funding.

The drought, as South Africa heads into the southern hemisphere summer, threatens its diverse farm sector including maize, which could fuel food prices, and inflation, in an already weak economy.

"If it's long, indeed it will have serious impact on the food prices. It will have an impact on economic growth because agriculture is one of our focus areas. It would also have an impact on employment; it would have an impact on our revenues," he said. "We are bracing ourselves for the worst."

Pretoria's measures to help cash-strapped utility Eskom, which included converting subordinated debt into equity, had eased funding pressure, Nene said.

The utility had yet to draw down all of the roughly R50 billion of financial banking guaranteed by the government, he said.

"They still have room to play," he said. "All of that gives them breathing space between now and the time they go out to the market again."