Thu. Jun 20th, 2019

Load shedding: The rand has tanked after Eskom’s Stage 4 blackouts

load shedding eskom randEskom’s failure is having a devastating impact on the rand, which has slumped dramatically after Stage 4 load shedding was introduced on Monday.

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In the darkness, there is very rarely any good news to report. This latest round of load shedding has been one of the most fierce in recent memory, with Stage 4 power cuts breaking uneasy new ground for South Africa. Amid the chaos, the rand has been put to the sword by Eskom’s failure.

How load shedding affects the rand

Since Sunday, our currency has lost 2% of its value to the American dollar. Floating along near the R13.50 mark to the dollar over the weekend, three consecutive days of outages have plunged the currency down to R13.80. As TreasuryONE’s Andre Botha told us, load shedding has a devastating effect on the rand’s global standing:

“The rand stepped on the proverbial banana peel yesterday, as it slipped back to the R13.80 levels against the US Dollar. The reason for this is two-fold, with the US dollar strengthening for the 9th straight session and the concerns that are being raised about Eskom implementing load shedding.”

“Load shedding is normally Rand negative as a lack of power supply affects the country’s economic number as production and manufacturing fall. This could have a detrimental effect on the growth number out of South Africa. The rand could find itself on the defensive should further negative headlines reach the market.”

Andre Botha

Dollar to rand value for Tuesday 12 February

Our currency is currently experiencing a three-week low, after initially clawing ground back on its US counterpart. Some market estimates believe that the rand will fall to R13.90 against the dollar by close of business on Tuesday.

Meanwhile, fears that the R14 barrier could be breached have been exacerbated following SONA. President Cyril Ramaphosa said the way forward for Eskom would be to break the firm into three separate departments, but this was a statement credit ratings agency Moody’s had trouble agreeing with.

“The move paves the way for a more transparent group with more clearly allocated revenue and cost between business segments,” Moody’s said in a report on Monday. However, in and of itself it does little to address Eskom’s financial challenges.”

Moody’s

Cost to the economy

We reported earlier that the cost of load shedding has reached astronomical heights, with one expert suggesting that the blackouts cost R1 billion per stage, per day to the economy. Monday saw the country plunged into the darkness of Stage 4, which was estimated to have set us back by R4 billion.

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