News in South Africa 13th July:
1. Stage 8 load shedding warning:
South Africa’s sudden return to stage 6 load shedding after about a month of day-time suspensions of the rolling blackouts is not really a surprise, say energy experts – and the risk of things escalating remains a possibility.
Eskom was forced to return to stage 6 load shedding this week after inclement weather caused a spike in demand for power.
A major cold front swept the nation at the weekend, leading to below-zero temperatures in part of the country and even lead to the rare occurrence of snowfall in Gauteng.
This, in turn, caused a spike in user power demand, from around 30,000MW before the freeze to around 34,000MW after – equivalent to an additional four stages of load shedding.
At the same time, Eskom’s generation capacity has also deteriorated from a relatively consistent 28,000MW to under 27,000MW, adding further pressure to the grid.
In effect, Eskom’s generation shortfall went from around 2,000MW to 7,000MW overnight, necessitating the return to stage 6 load shedding.
On Wednesday (12 June), Eskom said that 6,432MW was shed from the grid. Technically, this is already equivalent to stage 7 load shedding, but the utility is using other mitigation efforts – such as load curtailment, load limiting, etc – to keep national schedules at stage 6.
However, this does not rule out the possibility of outages escalating.
Speaking to the Daily Maverick and Mail & Guardian this week, Eskom noted that stage 8 load shedding or worse is still a possibility, though it remains unlikely. It all depends on supply (keeping units up and running) and demand from users.
2. Sarb expected to keep rates steady:
South Africa’s Reserve Bank is expected to keep its repo rate unchanged next week as inflation has slowed markedly and will moderate further in coming months as past rate hikes filter through the economy, a Reuters poll of economists found on Thursday.
In a survey conducted July 6-12, 12 of 21 economists said the South African Reserve Bank (Sarb) will keep rates steady at 8.25% on July 20. The remaining nine said rates will be hiked 25 bps.
Economists say financial conditions have tightened enough as the Sarb has added a cumulative 475 basis points since November 2021.
In the US, where monetary policy tends to influence the rest of the world, inflation is slowing rapidly enough to allow the Federal Reserve to stop tightening rates soon although rates there are expected to be hiked at its meeting in two weeks.
“We see little reason for the Sarb to hike its policy rate further from the current 8.25%, with June 2023 inflation likely to have fallen back within the 3%-6% target range, and July inflation potentially below 5.0% on base effects,” wrote Razia Khan at Standard Chartered.
Khan added as inflation falls closer to the midpoint of the target range she sees scope easing to prevent policy from becoming too restrictive.
The poll suggests a cumulative 75 bps of easing in the first three quarters of 2024 to reach 7.50% as inflation continues to moderate closer to the target range midpoint.
Consumer inflation is expected to average 5.9% this year, 4.9% next year and 4.4% in 2025.
3. Rand likely to stay above R18/USD:
The second quarter of 2023 has seen the rand come under severe pressure, which will likely remain the case for the rest of the year.
This is according to Nedbank’s July 2023 Guide to the Economy, which expects the rand to average more than R18 to the US dollar for the rest of 2023.
Nedbank expects the local currency to average R18.34/USD in Q3 2023 and R18.07/USD in Q4.
The rand has been falling since the start of the year and weakened further in the second quarter.
The currency was “severely hurt by the tensions with the US and its potentially grave economic and financial consequences for South Africa’s already struggling economy”.
One of the most significant blows to the rand this year came from allegations that South Africa supplied arms to Russia to aid its Ukraine war, which sparked fears of sanctions. This drove the rand to a record low of R19.81/USD on 25 May.
In Q2 2023, the rand depreciated by 5.6% against the US dollar while weakening by 6.1% and 8.4% against the euro and the British pound, respectively.
Since then, the rand has recovered some lost ground, supported by lower stages of load-shedding at the start of winter, slightly better economic and trade outcomes, and the SARB’s aggressive interest rate hikes.
A softer US dollar also offered some support, as global risk appetites improved slightly amid evidence of receding US inflation and hopes of an end to the Fed’s rate hiking cycle.
“However, the rand came under renewed pressure in early July as global risk sentiment soured again on signs of sticky core inflation and increasingly hawkish rhetoric from the US Fed and other central banks,” Nedbank said.
For the year to date, the rand is down by 13.6%, 16.8%, and 17.1% against the US dollar, the euro, and the British pound.
So far this year, the rand has been one of the worst-performing emerging market currencies, and the outlook remains uncertain.
“We expect the local unit to remain volatile, heavily influenced by patchy global risk sentiment, which is likely to be erratic as the outlook for US interest rates remains uncertain and global growth prospects continue to wane,” it said.
“Local factors are also unfavourable. Concerns about the disruptive impact of load-shedding, the potential consequences of the government’s relationship with Russia and political noise ahead of the 2024 elections will continue to hurt investor sentiment.”
4. New driving laws implemented:
The Department of Transport says it’s all systems go for a national rollout of the controversial new Aarto system.
This follows the Constitutional Court’s ruling that the enabling legislation is indeed valid.
In 2020, the Organisation Undoing Tax Abuse (Outa) launched a constitutional challenge to the two acts governing the Aarto system, which establishes a single national system of road traffic regulation and introduces a demerit system for errant drivers.
And last January, the High Court upheld that challenge, declaring the acts to be unconstitutional and invalid.
The Constitutional Court on Wednesday overturned that ruling, though.
The department has welcomed the ruling handed down on Wednesday.
It said the Aarto Act was ultimately aimed at arresting road carnage and described it as “an important cog in our road traffic law enforcement interventions”.
While the legislation has been a part of our law since as far back as 1998, so far, it’s only been piloted, in part, in Joburg and Tshwane.
But the department said Wednesday’s ruling had “cleared the path for the implementation of Aarto”.
It added that it would now be moving “with speed” to roll out the Aarto system, together with the new demerit system it introduces across the country.
The department said that in the coming days, the Road Traffic Infringement Agency, which is responsible for effecting the Aarto system, will be mobilising the necessary capacity.
It added that it’s also ready to finalise its recommendations for the appointment of the Appeals Tribunal and the proclamation of the legislation.
What Aarto means for drivers:
The key change to South Africa’s road laws through the Aarto would be the introduction of a demerit system whereby a person, operator or company (juristic person) pays the penalty and incur points when a traffic infringement is committed.
Drivers will start with zero points and will “earn” demerit points as and when applicable through the Aarto process, where demerit points are allocated.
Currently, the threshold is a maximum of 12 points, with the proposed amendments recommending 15 points. From point 13, the various sanctions of suspension or cancellation of a driving licence will occur, as defined in the Aarto legislation.
The laws also make provision for new offences to be added, even those relating to admin, such as failing to update addresses.
5. Search begins for new Public Protector:
Parliament’s Ad Hoc committee established to appoint the new Public Protector released the names of 38 nominees who have met the requirements to be considered.
The names will be published on the national legislature’s website for public comment for seven days.
The shortlisting process is set to begin on 26 July.
Suspended Public Protector Advocate Busisiwe Mkwebane’s term of office comes to an end on 15 October.
The Public Protector’s office is an independent body that investigates claims of abuse of power, unfair treatment, non -adherence to rules, dishonest or improper handling of money and personal gain through bribes and corruption.
The conditions to be considered for the position, besides being a South African Citizen, a judge, advocate or attorney, is to be a fit and proper person to hold such office.
All information sourced from articles posted by: BusinessTech, Moneyweb, DailyInvestor, EWN, and ENCA.
