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Rand weakens as Eskom crisis weighs

The rand has tumbled more than 6% since ailing power supplier Eskom resumed nation-wide electricity blackouts last Monday over technical issues at its creaking fleet of coal-fired plants.

Picture: EWN

JOHANNESBURG - The rand fell on Tuesday, with investors staying on the sidelines ahead of the annual budget where the financial crisis at state power utility Eskom is set to be addressed.

At 0620 GMT, the rand was 0.11% weaker at R14.1500 per dollar, compared with its overnight close of R14.1350 in New York.

The rand has tumbled more than 6% since ailing power supplier Eskom resumed nation-wide electricity blackouts last Monday over technical issues at its creaking fleet of coal-fired plants.

Most of Eskom’s debt of about R420 billion ($30 billion) is under government guarantee, a major risk to the country’s sovereign credit rating which is ranked at junk status by two of the top three ratings firms.

Eskom expects to make annual losses of around R20 billion this year, and Finance Minister Tito Mboweni is set to announce a bailout for the firm during his budget speech on Wednesday in Parliament.

The domestic uncertainty has kept the rand on the back foot despite a return of risk demand globally, with most investors tentative about making any big calls on the currency following the previous week’s selloff.

Bond prices also fell slightly. The yield on the benchmark 2026 paper edged higher to 8.89%, from Monday’s close of 8.855%.

“We think that the currency will remain vulnerable in the next few days,” said analysts at London-based Continuum Economics in a note, citing worries about a possible resumption of power cuts.

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