Rand extends losses on Eskom special paper
Minister Pravin Gordhan said the new CEO of Eskom was likely to be announced next week after the resignation of Phakamani Hadebe in May
The rand extended losses on Tuesday afternoon as investors found little comfort in the government’s plans to reform Eskom.
Earlier on Tuesday, public enterprises minister Pravin Gordhan tabled a plan for the ailing power utility, which included expanding renewable energy output, cutting fuel costs as well as separating parts of Eskom’s transmission component.
The special paper on the country’s largest electricity supplier comes just a day before finance minister Tito Mboweni is set to deliver the medium-term budget policy statement (MTBPS). The minister is expected to provide further detail on the government’s R59bn Eskom bailout.
Rabobank emerging-market strategist Piotr Matys said investors were waiting to hear more about the restructuring of Eskom’s R450bn debt from the briefing. “Perhaps they should be more patient and wait for Mboweni to present his MTBPS for such details. It’s fair to say that the bar for Mboweni to satisfy the market seems to be set relatively high, especially with Moody’s Investors Service scheduled to release its latest review on SA on Friday.”
Moody’s, the only major credit-ratings agency that has not downgraded SA to below investment grade — previously warned that the Eskom bailout would be credit negative for SA.
“Overall, the announcement was net negative, but the real takeaway is that the lack of decisiveness in today’s announcement increases the importance of tomorrow’s MTBPS,” Monex Europe analyst Simon Harvey said.
“The market will use that announcement as an anchor in pricing the Moody’s sovereign credit-rating decision. In that respect, today’s market volatility is just a taster of what is to come,” Harvey said.
Gordhan said the new CEO of Eskom would be likely to be announced next week after Phakamani Hadebe resigned in May.
At 2pm, the rand had weakened 0.6% to R14.6465/$, after dropping to R14.7237 in intraday trade. It had weakened 0.43% to R16.2304/€ and 0.51% to R18.8211/£. The euro was 0.17% lower at $1.1081.
The benchmark R186 government bond was weaker, with the yield rising 5.5 basis points to 8.21%. Bond yields move inversely to their prices.
Gold was down 0.33% to $1,487.87/oz and platinum 1% to $908.8/oz. Brent crude lost 0.91% to $61.02 a barrel.