Global Courant 2023-04-11 17:45:54
The rand has been rocked by global risk aversion, coupled with warnings from Electricity Minister Kgosientsho Ramokgopa that the country faces a massive energy shortage in South Africa’s approaching winter months.
The rand was seen trading weaker in increasingly risk-averse markets, with the domestic currency weakening to R18.62 against the dollar on Friday before retreating modestly to around R18.30 on Tuesday (April 11).
According to Annabel Bishop, chief economist at Investec, the risk-off environment is determined by both global and local factors.
Globally, warnings about poor global production have dampened sentiment. Locally, the energy crisis – with no solution in sight – is keeping investors at a distance.
“On Thursday, the IMF said global economic growth is likely to remain around 3% over the next five years, the lowest medium-term growth forecast since 1990, and well below the 3.8% average growth we have seen over the past two decades. seen.” she said.
As a result, growth prospects remain weak given continued high inflation. Bank failures in the US and Switzerland have added to market concerns, she said.
Further warnings about global growth also stem from “geopolitical fragmentation” driven by tensions between the US and China. These threaten to damage the global economy, with foreign direct investment and other capital increasingly channeled to aligned blocs of countries.
Domestically, South Africa continues to grapple with ongoing blackouts, with electric utility Eskom pushing the blackout back to stage 5 after the Easter weekend.
Bishop said allegations from Eskom whistleblowers, including former CEO Andre de Ruyter, blamed “widespread sabotage, criminality and destructive and illegal industrial action”.
Meanwhile, the new electricity minister, Kgosientsho, has followed a different story, blaming technical and operational problems, particularly in Eskom’s coal fleet.
Whatever the source, the fact remains that South Africa’s power problems persist, and Ramokgopa last week warned that up to Stage 10, a load shedding could hit this winter given current capacity constraints.
“Ramokgopa said ‘now we are entering winter, which is going to be a very difficult period. The numbers suggest that historically the average (demand) is about 35,000 MW, but it could be as high as 37,000 MW,” Bishop noted.
Eskom can guarantee us about 27,000 MW on average and the peak demand in the summer is about 32,000 MW. The difference between guaranteed and expected winter demand is about 10,000 MW, which roughly corresponds to 10 phases of load shedding, taking into account Eskom’s calculations of 1,000 MW per phase.
“Increased demand will widen the gap in the electricity shortage, which will negatively impact economic growth and investor demand,” Bishop said.
“There is still no solution in sight to South Africa’s ongoing electricity crisis, as Karpowership’s gas-to-power (electricity) supply continues to be blocked by the South African Department of Forestry, Fisheries and the Environment (DFFE).
“Eskom is now reportedly considering purchasing electricity from a Karpowership power station off the coast of Mozambique, albeit only worth 1,000 MW, and totally insufficient to stop its divestment or escalation,” she said.
The economist noted that lean trading conditions around Easter have exacerbated the negative impact of bad news on the domestic currency, with a number of negative factors hitting the rim.
last week.
This week, the market’s attention will focus on tomorrow’s US CPI and key data, she said.
Read: names of corrupt Eskom officials handed over to government