The rand fell to a six-week low yesterday as weakening economic indicators in South Africa due to its persistent energy problems spooked investors in favour of safe-haven currencies.
The domestic currency was 0.85% lower to R17.34 against the US dollar, its weakest since December 19 last year, as the country’s worsening power crisis continues.
Eskom has extended implementing Stage 4 load shedding continuously until further notice after generating units at four power stations broke down and are undergoing repairs.
According to the South African Reserve Bank, ongoing electricity supply challenges are expected to shrink economic growth to a paltry 0.3% this year, which could result in a number of job losses.
Investec chief economist Annabel Bishop said the rand weakness against the key crosses reflected concerns over South Africa’s growth.
Bishop said the rand was trading weaker as investor sentiment against South Africa has dipped, and the interest rate differential with the US has not narrowed significantly.
“The persistence of load shedding has eroded investor confidence in the domestic economy, with no state solution to end the damaging effect on the economy in the near term, as we have been increasingly noting over the course of this month,” Bishop said.
“The looming threat of Stage 8 load shedding, and outages including Stage 6 so far, have eroded confidence in the domestic economic outlook, with no government solution in sight in the near term pushing the rand weaker.
“Little improvement is expected this year in terms of state infrastructure, particularly on the rail, port, electricity and water supply front, which will impede economic growth and so job creation, keeping the rand weak.”
Cash-strapped South Africans are not only facing electricity supply shortages but also steeply-rising prices as Eskom has been granted permission to impose an 18.65% tariff increase from April 1 this year.
President Cyril Ramaphosa yesterday backtracked from a call he made a week ago that the Eskom board consider postponing implementing the tariff increase.
Ramaphosa said the new tariff was approved by the National Energy Regulator of South Africa (Nersa) following a prescribed process, which includes wide-ranging public consultation.
“It is important that we affirm the independence of Nersa and the importance of following the due legal process in setting tariffs,” Ramaphosa said.
“Tariffs that reflect the cost of producing electricity are necessary for Eskom’s financial sustainability and for the utility to be able to service its debt, and to undertake the critical maintenance that is needed to end load shedding.”
Ramaphosa also said that resolving the growing energy crisis remained a top priority as load shedding continued to undermine economic growth, while reaffirming the government’s commitment to coal.
Meanwhile, the JSE All Share Index fell almost 1% to around 80 180 points as investors turned their focus to monetary policy decisions by central banks, including the US Federal Reserve, as well as corporate earnings. It closed the day down 0.58% at 80 324.86 points.
Several sectors were trading in the red, led by tech stocks, miners and industrials.
Prosus stocks fell 6% to R1 381 per share followed by its parent company Naspers, which was 5.6% down to R3 343 per share, while Exxaro Resources and Aspen Pharmacare were 3.9% and 3.7% lower to R216.14 and R147.88 per share, respectively.
BUSINESS REPORT