Power cuts hit rand
The rand was weaker early on Friday after nationwide electricity blackouts overnight by ailing state utility Eskom spooked investors and reignited worries about the economy.
JOHANNESBURG - The rand was weaker early on Friday after nationwide electricity blackouts overnight by ailing state utility Eskom spooked investors and reignited worries about the economy.
At 0645 GMT, the rand was down 0.23% at R14.7700 per dollar, compared with the previous session’s best of R14.6630.
Power firm Eskom implemented stage 2 power cuts, or load shedding, shaving off 2,000 megawatts from the national grid starting at 2000 GMT on Thursday evening until 0300 GMT on Friday.
The firm said it had lost three generation units, pushing its emergency reserve capacity to “critical levels”.
Eskom added the risk of power cuts on Friday was high as the system remained severely constrained, and that load shedding on Friday could not be ruled out.
The rand had rallied on Thursday to its firmest since before a bleak 30 October budget, mainly on the back of renewed hopes of a US-China trade deal that helped the currency shrug off a dip in business confidence and a contraction in manufacturing.
“Although the rand can sometimes perform well when growth is weak as import demand softens, history shows us that this is not the case when load-shedding hits,” traders at ETM Analytics said in a note.
The latest bout of nationwide blackouts come after repeated power cuts in February and March, which dragged the economy into contraction and pushed government to grant Eskom a $4 billion bailout on top of a $16 billion bailout spread over the next 10 years.
Bonds were also weaker, with the yield on the benchmark paper due in 2026 up 5.5 basis points to 8.455%.
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