Rand continues to plunge as load shedding exacts a toll

The rand extended its week’s losses on Thursday, as severe power cuts and deadly floods weighed on the economic growth outlook.

At 9.52am, the rand traded at R15.15 against the dollar, around 0.8% weaker than its Wednesday close and taking losses since the end of last week to more than 3%.

Eskom reduced scheduled power outages from stage 4 to stage 3 on Wednesday as some generation units returned to service, but investors are worried that the outages could persist into the winter months.

Last week’s devastating floods in KwaZulu-Natal province caused at least R10-billion of infrastructure damage, a reminder that the country is vulnerable to the impact of climate change.

Commerzbank analysts said in a research note that the rand was under significant selling pressure, pointing to increased risks linked to the power cuts and floods.

They also noted that March annual inflation had come in slightly below expectations on Wednesday at 5.9%, another factor acting against the rand as a reading of 6% or over would have increased the arguments for the central bank to pursue more aggressive policy tightening. The central bank’s inflation target range is 3-6%.  — (c) 2022 Reuters