Rand on a slippery slope as energy crisis shows no signs of abating

The rand traded at its weakest point against the dollar in about a month on Tuesday morning, decoupling from the global risk-on scenario that has played for the better part of January.

The rand, which is down just more than 2% against greenback since the start of the year, traditionally tends to benefit when global markets move higher.

The dollar has also been under pressure relative to the basket of currencies, including the pound and the euro. The dollar weakness is also reflected in relatively higher commodity prices such gold, which has gained 5% since the start of 2023.

The gold price is especially sensitive to perceptions of the direction of US monetary policy. The dominant market theme is that the US Federal Reserve will slow the rate of interest rates increases given apparent signs of subsiding inflation.

The rand’s underperformance, therefore, suggests that local factors may be at play. The unreliable and erratic power supply from power utility Eskom is singled out as one of the biggest threats to growth prospects.

The frequent power rationing is expected increase the cost of doing business in the country at the time when a cost-of-living crisis was in full swing. 

SA packaging group Nampak said on Monday that its operations are “not materially affected at lower stages of load-shedding, but the negative impact escalates substantially beyond stage 4”.

The rand was little changed on the day at R17.41/$, compared with R16.84/$ in the middle of January.

In commodity markets, Brent crude was off 0.31% to $84.12 a barrel. The gold price was little changed at $1,919.72oz.

The JSE is likely to move lower in line with other global markets, though the pullback came off a very high base after a strong start to the year. 

mahlangua@businesslive.co.za