SOEs add to South Africa’s woes

Over the past week, the Rand has seen some solid weakening to levels last seen at the beginning of January.

The post SOEs add to South Africa’s woes appeared first on The South African.

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This Rand report is brought to you by Sable International

This has come off the back of the crisis at Eskom and the reimplementation of load shedding countrywide. On top of the diminishing state of Eskom, SAA is in dire straits. All of this does not bode well for the South African government, which has written guarantees to secure loans for multiple state-owned enterprises.

In the global economy, Donald
Trump declared a state of emergency to unlock funding for his border wall –
this has been criticised by both Republicans and Democrats. The talks between
the US and China have been progressing and it seems that some form of deal
might be available within the next month or so.

In the UK there has been a
revolt from the Labour party with seven MP’s leaving the party in protest
against the leadership of Jeremy Corbyn. With just 38 days left until the UK
leaves the EU, pressure is mounting against Theresa May to secure a deal before
the cut-off time. This is a major risk factor for the global economy and should
not be taken lightly as volatility will definitely be increasing as the 29
March deadline approaches.

In South Africa, we have the Budget Speech on Wednesday. For investors, the focus will be on how the South African government will tackle the problems associated with Eskom and SAA. With debt mounting and the generation capacity of Eskom under pressure, the government is expected to announce splitting Eskom into three separate entities: generation, transmission and distribution. How things will pan out remains to be seen, and this will be something to watch very closely.

db6b31b2 2019 02 19 the rand report - SOEs add to South Africa’s woes

Overall, the Rand is expected
to remain at this weak level until the Budget Speech. Depending on the level of
reforms implemented by Finance Minister Tito Mboweni, it could go either way.
Traders should remain vigilant and keep an eye on the currency during these
high-risk periods.

  • Tuesday

UK Average hourly earnings – Average Hourly Earnings is expected to increase, this is a positive to the GBP, so it could in effect weaken the ZAR.

  • Wednesday

SA Budget Speech – The Budget Speech will
outline the trajectory of the SA economy and how the Government will deal with issues
arising from SOEs and move the economy forward.

SA Inflation Data – Inflation is
expected increase. If this does happen, that will be ZAR negative.

  • Thursday

SA Trade Balance Data – If the Trade Balance does
widen, that would be ZAR negative. With the currency weakening at present, it
does not bode well for this data point.

  • Friday

EU CPI data and ECB Pres. Draghi’s speech – CPI is expected to
increase. This is what the EU wants and would thus be EUR positive. Any
deviation from this would be a cause for volatility.

The post SOEs add to South Africa’s woes appeared first on The South African.

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