- The South African Rand depreciated from 18.4 to 18.8 against the US dollar
- This represents a 2% depreciation
- Continuing power outages remain the primary cause
Harare- The South African rand has taken a hit, depreciating by 2% week on week to trade at 18.8 against the US dollar. The country's power deficits have been the main driver behind the currency's poor performance, casting a bleak outlook.
The Rand lastly recorded appreciation on the 19th of June 2022 when it traded at 18.2 against the greenback and to date, the currency had trimmed gains by 3.2%.
With stage 1 and stage 3 load-shedding already enforced in some areas, the situation has disrupted economic activity and caused uncertainty for investors.
Industries such as manufacturing and mining have been hit hard by power cuts, forcing them to use alternative power sources, leading to reduced productivity, output, and increased operating costs.
This has negatively impacted the country's GDP growth rate, causing investors to lose confidence in the economy and the currency, and seek refuge in the US dollar. T
he South African Reserve Bank has estimated that the energy crisis may have cut between 0.7 and 3.2 percentage points off the GDP growth rate in 2022, with a dampening effect likely to last until early 2024.
Electricity blackouts in South Africa have also created uncertainty for investors, questioning the reliability of the country's energy infrastructure. This has led to a decline in foreign investment, further impacting the value of the rand in the long run.
Continued load-shedding is hobbling the mining industry, manufacturing, small businesses, and jeopardizing economic efficacy.
One potential solution is to auction off power plants to private companies and allow them to compete to offer power, creating a profit motive and resulting in better performance. However, this option is currently unpopular with the government, which has been accused of corruption and mismanagement of funds in the energy sector.
Privatising power plants would lower the high levels of corruption currently plaguing the sector, according to the Zondo Commission's reports.
With 45,000 megawatts of baseload in coal, Eskom has enough power to run the country, but the power plants are poorly run and maintained due to corruption and mismanagement of funds.
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