- The rand appreciated to 18.4 against the dollar
- This was its best performance month to date
- However, easing power concerns are just temporary as they are mainly generators backed
Harare- The South African Rand roared to 18.4 against the greenback on the 19th of May 2023, its highest in over a month. At that performance, the Rand surpassed the Zambian Kwacha, Kenyan Shilling and Nigerian Naira which came at 19.3, 140 and 655 against the dollar respectively.
Kenya is the economic harbour of East Africa just like South Africa is in Southern Africa. Nigeria is the biggest economy so the performance of these three currencies bears an effect on continental economic performance at large.
The latest Rand performance was buoyed by easing grid-failure concerns with an increase in electricity supply. The market was expecting increasing load-shedding in June, but load-shedding has been suspended for more than half the day and kept to lower stages at night, against odds of getting worse.
To ease power outages amid the national grid's failure to meet demand, the country secured 1000 megawatts of electricity from Mozambique.
Minister of Electricity, Kgosientso Ramokgopa announced that the country would receive 600MW in the next six months and 1000MW in the long term through Mozambique’s Cahora Bassa hydroelectric power plant.
The higher availability of electricity is further attributed to improved maintenance at Eskom's power plants and increased diesel supply at the open-cycle gas turbines that are used for emergency supply during periods of high demand, as well as higher tariffs that have cut demand.
However, these are just short-term measures being taken, not to resuscitate the economy but to starve the total grid failure, which was expected as soon as June 2023. Eskom is currently generating 60%, leaving out a deficit of 40%.
Due to incessant power cuts, South Africa narrowly escaped a recession in the first quarter, but the South African Chamber of Commerce and Industry (SACCI) business confidence index fell to a nine-month low of 106.9 in May 2023, from 107.1 in March.
Between April and May, three key factors weighed on South African sentiment: lower trade volumes due to depleted power supply, fewer inward tourists, and the weaker rand exchange rate against major trade and investment currencies. All these, are primarily rooted in power deficits. Lower trade volumes emanate from a lack of enough energy to produce and the same goes with currency performance.
According to SACCI, despite emerging international developments, domestic issues like electricity load-shedding by Eskom affected the business climate detrimentally.
Due to excessive load-shedding, South Africa’s retail trade also shrank by 1.6% in April 2023, against a revised 1.5% fall. This was also way off market estimates of a 1.4% decline
This marked the fifth consecutive month of drops in retail activity and at the quickest pace since June 2022.
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