The rand sank sharply towards R17.10 against the dollar amid heightened concerns over South Africa’s power crisis, which deepened yesterday, as President Cyril Ramaphosa cancelled his scheduled trip to the World Economic Forum in Davos.
Rotational power cuts have severely crippled economic activity. Barely two weeks into the new year, struggling state-owned utility Eskom resolved to implement Stage 6 load shedding indefinitely, its worst-ever outages.
Investec chief economist Annabel Bishop said that although sentiment in global financial markets will remain focused on US economic data, the rand was likely to remain volatile as high commodity prices have seen substantial easing.
Bishop said higher metals and mineral commodity prices were a benefit for the rand, but the looming threat of Stage 8 load shedding, and persistence of Stage 6 so far, was eroding confidence in the domestic economic outlook, with no government solution in sight, pushing the rand weaker this afternoon as the president skips Davos.
“A worsening in rail and port capacity is a further risk for South Africa and to the rand this year,” Bishop warned.
“While global financial market sentiment has improved in 2023 so far, January typically sees seasonal strength in the rand, while the year is just at its start,” she said.
Eskom yesterday postponed indefinitely its scheduled media briefing due to emergency engagements with Ramaphosa, saying it would only update the nation about the state of the grid once meetings were concluded.
The power utility, however, said 14 generators were expected to return to service over the course of this week, helping to ease the pressure on the power system.
As a result, Eskom spokesperson Sikonathi Mantshantsha said load shedding would be eased to Stage 4 during the day from Tuesday morning, with Stage 5 load shedding implemented in the evenings, daily.
“Eskom cautions the public, however, that there is a high degree of uncertainty associated with this and that these changes will only be possible in their entirety if the units return to service as planned,” Mantshantsha said.
“Changes in the stages of load shedding can therefore occur at short notice, due to the inherent unreliability of the coal power station fleet,” he said.
Eskom procured an additional 50 million litres of diesel last week to run its open-cycle gas turbines, more and above the 50 million litres it received from PetroSA at the end of November.
It said this fuel will be utilised sparingly to manage the pumped storage dam levels and to limit the amount of load shedding during the day.
Meanwhile, Eskom said the summer planned maintenance programme is continuing, and will taper off during the winter months, helping to make more capacity available to produce electricity.
Meanwhile, the National Energy Regulator of SA (Nersa) last week granted Eskom an 18.65% tariff increase for the 2023/24 financial year, effective from April 1.
This is notably below the 32% requested by Eskom, but more than three times the expected inflation rate for 2023.
This means that administered prices will continue to provide significant upwards pressure on local inflation dynamics.
Eskom said unplanned breakdowns currently amount to 16 173MW of generating capacity, while 12 generators were out on planned maintenance, representing 5 804MW of capacity.
“Worryingly, the energy supply situation is unlikely to improve over the short term, while demand is set to pick up as economic activity returns following the December break,” said Tracey-Lee Solomon, economist at Bureau for Economic Research.
“Sustained load shedding at current extreme levels is the most significant downside risk and drag on SA’s growth prospects,” she said.
BUSINESS REPORT