Rand takes a hit on Eskom load shedding

The rand pushed through R15.00 against the dollar in morning trade on Wednesday after Eskom announced stage 2 load shedding.

The local unit lost 1% against the greenback after the state power utility cited a shortage of capacity.

In a statement, the power company said that the severe supply constraint was due to high levels of unplanned breakdowns.

“The supply constraint is caused by, among others, five generating units that are unavailable due to boiler tube leaks,” it said.

“In addition, a conveyor belt supplying Medupi power station with coal failed on Saturday (12 October) resulting in low volumes of coal being supplied to the power station thus limiting the generating capacity to approximately half the station output.”

“Eskom remains the single largest threat to local economic growth,” said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

Moody’s Investors Service is paying particular attention to Eskom’s challenges, as it is expected to make a decision on the country’s sovereign rating next month (November).

Financial markets have been pricing in a downgrade for some time. Moody’s is the only major company to rate South Africa’s debt at investment grade after S&P Global Ratings and Fitch Ratings cut their assessments to junk in 2017.

South Africa has experienced intermittent power cuts since late 2005, with the previous round occurring more than six months ago, Bloomberg noted. The government has said it will announce plans to restructure Eskom into three operating units and reorganise its debt by the end of the month.

“Potential US sanctions against Turkey, continuous uncertainty around Brexit and jitters about the US and China only reaching a partial deal are all stoking market fears. This is adding pressure to emerging market currencies, causing the rand to lose some ground after Monday’s rally,” Botes said.

Local and US retail sales will be released this afternoon, she said.

The rand traded at the following levels against the major currencies:

  • Dollar/Rand: R15.00  (0.74%)
  • Pound/Rand: R19.08  (0.25%)
  • Euro/Rand: R16.55  (0.77%)

Read: Joburg looks beyond Eskom to beat load shedding

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Rand takes a hit on Eskom load shedding