News in South Africa 17th April:

1. Stage 8 not imminent but possible:

Despite the tripping of Koeberg Unit 2 over the weekend prompting fears that stage 8 load shedding could be looming, stage 8 load shedding is only likely if there is a ‘perfect storm’, which would include a cold front lasting for several days and Eskom having multiple breakdowns.

Stage 8 not imminent but possible
Photo by Loïc Manegarium

Energy analyst Clyde Mallinson added that Koeberg is no longer as essential for grid stability as it was in the past.

Although stage 8 is not imminent, stage 6 load shedding is expected to remain for much of the winter months.

2. Metro tariff hike:

eThekwini Metropolitan Municipality residents will face the sharpest tariff increases out of the country’s major metros if the city’s draft budget for 2023/24 is approved.

In practical terms (rounded up), it wants electricity tariffs to increase by 22%, water by 15%, sewerage by 12% and property rates by 9% from 1 July.

Mayor Mxolisi Kaunda, tabling the draft budget, claimed that “the three biggest contributors to the increases are out of our hands, that is, the Eskom increase, Umgeni Water Board increase and salary increases”.

This does not explain why its proposed electricity tariff increase of an average of 21.91% is 3.42% higher than Eskom’s 18.49% municipal hike.

Umgeni Water’s approved tariff increase for bulk water is around 13%. Its proposed residential property rate increase is nearly double that of Johannesburg, Nelson Mandela Bay and Ekurhuleni. But already, its rates are significantly higher than Joburg and Cape Town.

On a R1 million property, an eThekwini homeowner pays more than 100% more than one in Joburg and nearly 200% more than one in Cape Town.

Tshwane and Mangaung are excluded from this comparison as neither have tabled draft budgets for 2023/24. Tshwane, which has battled instability this year, is nearly two months late in tabling an adjustment budget for the current year. Only then can it focus on the draft budget for next year.

ResidentialRatesWaterSewerageElectricity*Refuse removal
City of Joburg5.3%**9.3%9.3%18.65%7%
City of Cape Town-1.1%8.6%8.6%17.6%5.5%
Nelson Mandela Bay5%6%6%18.49%6%
Buffalo City0%9.86%5.3%18.65%5.3%
* Pending finalisation of the Nersa tariff guideline. 
** Plus increase from valuation roll which, in total, is 12% higher.
*** Planned increase prior to Nersa pronouncement.

Notably, the City of Cape Town has proposed a 1.1% decrease in property rates. This is due to the new 2022 valuation roll that will come into effect in July.

3. Big ‘funding squeeze’ for SA:

South Africa, as part of the Sub-Saharan region, is facing shrinking aid budgets and reduced inflows from partners, international and cross-border, leading to a “big funding squeeze,” says the International Monetary Fund (IMF).

Abebe Aemro Selassie, the director of the IMF’s Africa Department, during the announcement of a new report analysing the region’s current economic landscape, said that countries in the Sub-Saharan region have effectively been cut off from international markets as a result of high inflation and borrowing costs.

In its latest report, “Big Funding Squeeze”, Selassie said people in the region are feeling the effects of a funding crisis.

“Since Russia’s invasion of Ukraine, the cost of living is more expensive, borrowing costs have increased, and access to cheaper funding is dwindling,” he said.

“Coupled with a long-term decline in aid and a more recent fall in investment from partners, this means that there is less money to be spent on vital services like health, education, and infrastructure.”

The director said if measures are not taken, this funding squeeze will hamper Sub-Saharan’s efforts to build a skilled and educated population and to be the driving force of the global economy in years to come.

Across the board, public debt and inflation levels are the highest they have been in decades, eroding household purchasing power and affecting cash-strapped consumers.

The IMF has revised the country’s annual growth expectations to around 0.1%. Selassie said that the country would probably scrape through with a small expansion; however, others have expressed a significant lack of confidence in this happening.

Looking broadly at Sub-Saharan Africa, the organisation expects growth to slow to 3.6% in the region – marking the second year of decline.

4. Experts divided on energy ministers performance:

Some energy analysts are divided on how Minister of Electricity Kgosientsho Ramokgopa has faired in his job as the country continues to battle crippling power cuts.

Ramokgopa was appointed as the inaugural minister of electricity over a month ago in a bid to respond to the electricity crisis brought on by a range of challenges at Eskom.

This included aging infrastructure, governance issues, and dwindling generation capacity.

Ramokgopa has since had several high-level meetings with management at the power utility and business leaders as he puts his implementation plan in motion.

5. Expectations of Fed rate hike climb:

The dollar rebounded on Monday and hit a one-month high against the yen, as resilience in core U.S. retail sales and impressive Wall Street bank earnings raised market expectations for an interest rate hike from the US Federal Reserve in May.

While US retail sales fell more than expected in March, so-called core retail sales, which excludes automobiles, gasoline, building materials and food services, slipped just 0.3% last month, data released on Friday showed.

And first-quarter 2023 earnings from JPMorgan Chase & Co , Citigroup Inc and Wells Fargo & Co were better than expected, brushing off concerns about a banking crisis that unfolded in March.

Against the yen, the dollar rose to a one-month peak of 134.22 on Monday, with the Japanese currency coming under pressure as the Bank of Japan sticks to its dovish stance. The rand was steady at R18.06/$.

Meanwhile, the U.S. dollar index steadied at 101.65, standing some distance away from Friday’s one-year low of 100.78.

Friday marked the fifth straight weekly loss for the index, as recent signs that inflation in the United States is cooling have raised expectations that the Federal Reserve would not have to hike rates as much as previously feared.

Elsewhere, the euro slipped marginally to $1.0986, while sterling fell 0.02% to $1.2412.

“The U.S. bank earnings came out much better than expectations, which suggests that the U.S. economy is not so bad … So I think that will increase (expectations) for the Fed to continue raising interest rates,” said Tina Teng, market analyst at CMC Markets.

Money markets are now pricing in a roughly 81% chance that the Federal Reserve will raise interest rates by 25 basis points next month, up from about a 69% chance last week.

Short-term inflation expectations have also increased, with the University of Michigan’s preliminary April reading showing that one-year inflation expectations rose to 4.6% from 3.6% in March.

All information sourced from articles posted by: News24, Moneyweb, BusinessTech, EWN, and Fin24.

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