Major own goal for Eskom, and South Africa running out of money

South Africa’s rand weakened slightly from its highest level in five months on Friday, a day after a minister announced that a new inflation-targeting plan would be forthcoming. 

The rand traded at 18.10 against the dollar, approximately 0.4% lower than its previous close. In the morning session, it reached 17.99 per dollar for the first time since mid-December. 

Markets reacted positively to Deputy Finance Minister David Masondo’s comments on possible changes to the country’s inflation target. 

At an investor conference on Thursday, he mentioned that an announcement regarding South Africa’s inflation-targeting regime would be made “very soon.”

President Cyril Ramaphosa is scheduled to meet with his US counterpart, Donald Trump, this week to improve strained relations. 

Ramaphosa’s spokesperson, Vincent Magwenya, informed the SABC late Thursday that the visit would be brief and would not include a large delegation.

On Monday, 19 May, the rand was trading at R18.05 to the dollar, R24.00 to the pound and R20.18 to the euro. Oil was trading slightly lower at $65.15 a barrel.

Here are five other important things happening in and affecting South Africa today:

Eskom’s own goal: Eskom director Clive le Roux said that the reliability of power stations has declined, leading them to seek external expertise due to a shortage of experienced staff. Experts have noted that Eskom’s skills problem should not come as a surprise. For years, experts warned that Eskom was playing with fire by prioritising race targets over retaining experienced and skilled staff. [MyBroadband]

Running out of money: Nishan Maharaj, head of fixed interest at Coronation, has noted that South Africa’s economy needs to grow by 3% annually to stabilise government debt at 80% of GDP. However, it has averaged only 0.8% growth over the past decade and is expected to reach 1.5% over the next three years. This slow growth contributes to the country’s financial troubles, limiting tax revenue and worsening the debt-to-GDP ratio. [Daily Investor]

Transnet in deep trouble: Transnet’s weak financial position is raising concerns in the markets. Moody’s has put the freight rail company on review for a potential downgrade, following S&P Global’s credit watch. Moody’s warns Transnet may run out of cash within three months, increasing pressure on the government to provide support for this vital entity in South Africa’s economy. [Business Day]

Positve outcome expected from US-SA meeting: The automotive lobby group Naamsa remains optimistic about the potential renewal of the African Growth and Opportunity Act (AGOA) later this year, despite some arguing that the chances are slim. Additionally, Naamsa has briefed South Africa’s special envoy to the US in preparation for President Cyril Ramaphosa’s upcoming trip to the country next week. [News24]

AGOA could be saved: The ANC is optimistic about President Cyril Ramaphosa’s upcoming meeting with US President Donald Trump at the White House on Wednesday. Experts believe the meeting will strengthen trade relations between the two countries. [EWN]