Why load shedding topped off a bad week for the economy | Fin24
 
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Why load shedding topped off a bad week for the economy

Jun 17 2018 16:08
Tehillah Niselow

Johannesburg - Eskom confirmed a full day of load shedding on Friday, after implementing sporadic cuts on Thursday night to relieve the strain on the grid.

This follows demonstrations by workers at the power utility who are disgruntled about the salary freezes at the struggling state-owned entity (SOE).

It's unclear whether Eskom will be able to up its wage offer or even meet the union's demand for 15% hikes halfway.

From Minister of Public Enterprises Pravin Gordhan's statement on Thursday, it appears he is hoping that unpacking the depths of Eskom's financial crisis will placate unions.

However, two days of load shedding amidst plummeting temperatures are only topping off what has been a week of miserable economic news for South Africans.

Fin24 took a look at the week that was.

Weak rand

The rand was already on the backfoot entering the week, after the first quarter's shock contraction - and the weaknesses continued in line with other emerging markets.

The rand weakened nearly 4% this week, from under R13 to the US dollar on Monday to R13.45 to the dollar at 3:35pm on Friday.

The US Federal Reserve's announcement of a quarter of a percentage point increase to interest rates and two further hikes this year, bringing them to a total of four, has left emerging markets' assets reeling.

There is concern that some developing countries will face higher borrowing costs, and investment flows are once more turning to US Treasury bonds, away from riskier emerging markets.

Petrol price increase looming (again)

The country faces a fourth consecutive petrol price increase in July, due to rand weaknesses, the Automobile Association warned on Friday.

While the international Brent Crude oil price has slid since the four-and-a-half year high in May, the local currency's fragility will see motorists paying more at the pump, come July.

Prices will rise 32 cents a litre for petrol and 30 cents for diesel, according to the AA, which was commenting on the unaudited mid-month fuel data released by the Central Energy Fund (CEF).

Mining production slips

The country’s mining output fell by 4.3% in April year-on-year, with the precious metals sector the hardest hit, according to data by Statistics South Africa, 

Mining is a critical component of SA’s gross domestic product (GDP) and attention has now turned to the second quarter for signs of optimism whether the economy can recover from the 2.2% contraction in the first three months of the year.

The mining industry has complained of policy uncertainty related to the Mining Charter which was suspended in February on the eve of a court challenge. Minister of Mineral Resources Gwede Mantashe has committed to finalising the revised document by the end of June and the local industry is hoping this will boost investment.

Retail sales slow

April was a bad month for retailers, as consumers tried to adjust to the Value Added Tax (VAT) hike, increased fuel levy and new sugar levy.

Retail sales growth decelerated to 0.5%, down from the revised March figure of 4.6%, said Statistics SA this week.

Consumer spending accounts for just over 60% of GDP.

Business confidence deteriorates

Business confidence is slipping in the second quarter of 2018, after surging in the three months, following the election of Cyril Ramaphosa as ANC president, according to the latest Business confidence RMB/BER Business Confidence Index (BCI) released this week,

The BCI was down to 39 in the second quarter of 2018, after rising 34 to 45 points in the first three months of 2018.

This means that close to three-fifths of business respondents regard the current business environment as unsatisfactory.

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eskom  |  pravin gordhan  |  economy  |  fuel price  |  rand  |  load shedding  |  mining  |  gdp
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