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As cabinet approves power blueprint, South Africa's rand firms up

As cabinet approves power blueprint, South Africa's rand firms up
South Africa's President Cyril Ramaphosa has battled deteriorating economic conditions and corruption allegations [Sumaya Hisham/Reuters]

After the cabinet in South Africa approved the promulgation of its long-delayed plan for electricity generation amid nationwide power cuts by state utility Eskom, the rand stabilised on Thursday.

At 15:35 GMT, the South African currency was one percent firmer at 14.79 per United States dollar.

The Integrated Resource Plan (IRP) 2019 will replace a previous blueprint not updated for almost a decade. It explains the electricity generation strategy and covers the energy mix the country will rely on in the immediate future.

"The news comes as a great relief after months of uncertainty, in the midst of yet another round of load shedding [power cuts] implemented by Eskom," said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

South Africa was hit by power cuts for a second day on Thursday, with Eskom saying that a number of generating units were still out of service and may not be back up and running for a few days.

Debilitating power cuts in February and March pushed South Africa's first-quarter economic growth into contraction and raised the likelihood of the country losing an investment-grade rating.

Moody's is the last of the big three credit rating agencies to have an investment-grade rating on South Africa, and is due to deliver its latest credit review on November 1.

Equities fell slightly on Thursday, with the broader Johannesburg All-Share Index down 0.17 percent, while the blue-chip Top 40 index edged 0.28 percent lower.

Diversified miners were among the losers, with Anglo American down 1.27 percent to 360.54 rand ($24.30), while BHP Group shed 2.01 percent to 305.93 rand ($20.62).

"Commodity prices are under pressure at the moment, so all the diversified miners are trading weaker because of that - and a stronger rand causing a pullback," said Jean Wessels, a trader at AG Capital.

Bucking the trend were gold miners, with bullion edging up as investors focused on lingering uncertainties over trade ties between the US and China.

DRDGOLD Limited gained 2.5 percent to 6.95 rand ($0.47), Harmony Gold Mining Co rose 2.07 percent to 45.41 rand ($3.06), and Sibanye-Stillwater was up 1.96 percent at 25.45 rand ($1.72).

The yield - which moves in the opposite direction as the price - on the benchmark government bond due in 2026 fell 1.3 basis points to 8.26 percent.

SOURCE: Reuters news agency

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