Rand hits near 3-week low as Eskom steps up blackouts

South Africa’s rand fell to its weakest in almost three weeks on Monday as state electricity firm Eskom stepped up controlled power cuts because of a shortage of generating capacity.

At 1210 PM, the rand was 0.94% weaker at 13.73 per dollar, its softest level since January 24, after Friday’s close of 13.61.

“Load-shedding is never good, especially from a growth perspective. The weakness you’re seeing now is certainly linked to the power cuts. It will be interesting to see what the finance minister says next week about bailing out (state firms),” said trader at Unum Capital Michael Porter.

Read: Load shedding : Outlook not good 

Cash-strapped Eskom, which supplies 90% of the country’s electricity, resumed blackouts on Sunday. The most recent ones had been in early December.

On Monday said it would increase the power cuts from the national grid to 4 000 megawatts from 2 000 megawatts after six of its generating units unexpectedly went off line, and that outages would likely last until 2000 GMT.

Last Thursday President Cyril Ramaphosa said he planned to split Eskom into three separate entities in a move to avert a financial crisis that ratings firms have warned poses a major risk to the country’s sovereign rating.

Read: Eskom power cuts intensify as Moody’s calls it risk 

Investors however seemed unconvinced and by Friday had upped bearish bets on the currency, with the premium on options to sell the rand jumping to around one-month highs.

“We see potential for the rand’s further depreciation in the next few sessions,” said analyst at Continuum Economics Juri Kren in a note.

With strikes due, it could break through resistance at 13.80 against the dollar, said Kren.

Cosatu, the country’s largest union with more than a million and a half members, said last month it would stage a nationwide strike over large-scale layoffs at state-owned firms, particularly Eskom, and at private companies.

Bonds also suffered on Monday, with the yield on the benchmark paper due in 2026 adding 11 basis points to 8.76%, its highest since January 30.

Stocks were higher, with the Johannesburg Stock Exchange’s (JSE) Top-40 index up 081% to 47 383 points.