Key Highlights :
The South African rand has been weighed down by load shedding, a crisis that has caused scheduled daily blackouts across the country. However, recent signs that the crisis is easing are boding well for the currency, with global markets strategist Mamokete Lijane of Standard Bank Corporate and Investment Banking noting that “if we continue to resolve that issue—even if it’s not whittled to zero, but we’ve brought it to a place where growth can be better—that would increase our competitiveness, boost our rand.”
Electricity Minister Kgosientsho Ramokgopa has reported that available generation capacity and unplanned breakdowns are improving at utility Eskom. During the period between June 1 and August 15, non-residents were net buyers of R34.4 billion in local bonds, according to data from exchange operator JSE. During that same period, load shedding—at its most severe level, Stage 6, when Eskom cuts 6,000 megawatts from the grid—only occurred three times, according to data from ESP, a local app that provides updates and alerts on power cuts.
The currency has seen a 2.6% gain against the dollar since June 1, though it is still 11% weaker this year at about 19.15 to the greenback. The median of analyst forecasts compiled by Bloomberg sees the currency averaging 18 in the first quarter of 2024, about 6% stronger from where it is now.
The outlook for electricity supply in South Africa is improving, and this is providing a boost of optimism for the rand. If the crisis is able to be resolved, it will not only help to increase the country’s competitiveness, but could also lead to further gains in the currency. This is good news for investors and those with interests in the South African rand.