Rand heads for over 3% weekly loss on power crisis

The rand was on course for a loss of more than 3% against the dollar this week, as five consecutive days of power cuts reminded investors about the fragility of an economic recovery.

EOH led stocks higher after issuing an update on its relationship with Microsoft.

At 1520 GMT, the rand traded at R14.12 versus the dollar, barely changed from its previous close of R14.12 and more than 3.5% weaker than at the end of last week.

Struggling state power firm Eskom implemented one of the worst power cuts in several years from Sunday to Thursday, hurting small businesses without backup power generators and industrial firms that consume large volumes of power.

Eskom said power cuts were not likely on Friday, but warned the power system remained vulnerable.

Investors are waiting for more details on how President Cyril Ramaphosa’s government plans to shore up Eskom’s balance sheet – plans which should be unveiled during a budget speech by the finance minister on February 20.

After this week’s steep fall in the rand, Nedbank CIB analysts said they were more comfortable that risks to the currency were better priced.

“South Africa’s fiscal position has come to the fore as the market anxiously awaits more details on Eskom and how the government will account for this in the budget,” Nedbank CIB analysts wrote in a research report.

Government bonds firmed on Friday, with the yield on the benchmark 2026 bond falling 6.5 basis points to close at 8.88%.

On the bourse, stocks ended the week higher, with the Johannesburg All-share index up 0.19% at 54,628 points, while the blue-chip Top 40 index up 0.2% at 48,446 points.

The Chief Executive of EOH Holdings issued an open letter on Friday, in which he described a recent and fruitful meeting with the firm and the Microsoft leadership after Microsoft announced its intention on Tuesday to terminate its channel partner agreement with EOH’s subsidiary.

CEO Stephen van Coller said in the letter Microsoft has advised that it is taking EOH’s proposals under consideration and further review.

Its shares ended 14.64% stronger at R19.50 on the announcement and other measures that EOH is doing to strengthen its leadership.

Packaging and paper firm Mondi rose 0.94% to R353 after flagging an up to 29% increase in full-year basic headline earnings per share.

Food producer Pioneer Foods rose 1.47% to R81.25 after saying it increased turnover by 7.8% in the four months to January 31.

Source: moneyweb.co.za