Here’s what is happening in and affecting South Africa today:
Load shedding: No load shedding is planned for today, but the risk of it being implemented is elevated due to generating units being taken offline, and emergency reserves being used overnight to supplement supply.
- Credit rating response: Fitch is the first credit rating agency to respond to the 2020 budget – and it is not looking great. The firm said that the budget showed that there has been a severe deterioration in South Africa’s financial status, and that a large part of the promised fix (specifically cutting government wages) is unlikely to actually happen, especially not in the near term. Even with the ‘fix’, Fitch does not see does not see government debt stabilising in the coming years, heading to 72% of GDP by 2023. [Business Day]
- Mboweni vs unions: The success of finance minister Tito Mboweni’s budget plans for the next three years hinges on his ability to take on the country’s unions and successfully reduce the government wage bill. However, the unions are ready for a fight, and are already pushing back against this. South Africa’s biggest trade union Cosatu has said it won’t allow workers’ salaries to be slashed, saying that Mboweni is being reckless and provocative. Wage negotiations are expected to start sooner than expected.[Reuters]
- Covid evacuation: The Covid-19 virus is rapidly spreading in other countries, despite a slowdown of new infections and deaths in the epicentre, China. South Korea has hit over 1,000 infections and 11 deaths, with Italy, Iran and now Pakistan also reporting outbreaks. The first case was also reported in Brazil, marking the virus landing in South America for the first time. The South African government has reportedly decided to evacuate South Africans in Wuhan, setting aside R80 million for the procedure and subsequent quarantine. [EWN, Mail & Guardian]
- Soweto power: Soweto residents have handed over a memo of demands to Eskom officials, saying they want to pay a flat monthly rate for electricity of R150 a month. This is not to pay off the town’s debt, however – which is over R18 billion – they also want that debt to be scrapped. The residents have given Eskom 21 days to respond, with the power utility saying it would review and consider the demands. [Enca]
- Markets: The rand gained as Finance Minister Tito Mboweni kicked off the Budget Speech with mention of tax cuts, which came as a massive surprise as the market had expected hikes. However, this knee-jerk reaction was offset as the speech continued. South Africa’s fiscal situation remains dire, and while government is planning to slash the wage bill over next three years, the actual ability to effect this remains to be seen. On Thursday the rand was at R15.30 to the dollar, R19.77 to the pound and R16.68 to the euro. [XE]