News in South Africa 20th February:
1. Stage 8 incoming:
Experts, analysts and even Eskom itself are warning South Africans to brace for higher stages of load shedding.
The embattled power utility announced on Sunday night (19 Febraury) that further breakdowns at its power stations have necessitated continuous stage 6 load shedding to be in effect until further notice.
In its alert, the group warned that “given the high number of breakdowns, there is a possibility of further changes on the stages of loadshedding at short notice.”
The return of all-day stage 6 load shedding is troubling, as the weekend sees lower demand – and the country is still in its summer months, which also have lower demand patterns.
While Eskom has tried to assure the nation and instil confidence that the supply and demand patterns will change and be more favourable as the country approaches winter – due to less planned maintenance taking place – analysts and energy experts have warned that the situation is likely to get worse.
According to the Bureau for Economic Research, the electricity situation in South Africa remains dire.
The National Energy Crisis Committee (Necom) announced last week that Eskom has ample diesel supplies for now – which is helping shield the country from up to two stages of load-shedding during peak hours.
This means without the diesel-powered tubines, South Africa would already be at stage 8.
Intellidex analysts Peter Attard Montalto predicted back in January that stage 6 load shedding would be likely in February – a prediction that has now proven true – adding that stage 7 load shedding is coming up next by July, in the middle of winter.
Other energy experts have warned that the country will hit stage 8 – and beyond – by the middle of the year, given the winter demand and failing power availability from Eskom.
2. Greylisting decision D-Day:
South Africa’s fate regarding a possible greylisting will be decided this week at a four-day plenary meeting in Paris, France, starting today (20 – 24 February).
The decision will be made by the Financial Action Tax Force (FATF), an international watchdog aimed at ensuring countries prevent money laundering and financial terrorism through international standards.
A possible greylisting will make doing business with South Africa harder than usual as new compliance steps will have to be met, especially regarding cross-border transactions.
On top of procedural difficulties, the knock-on reputational damage could be severely consequential.
South Africa has been a member of FATF for almost two decades, and in 2021 an assessment highlighted several issues with the country’s compliance. The country was found to be deficient in 20 of the FATFs recommendations.
The FATF stated that while South Africa understood the risks of money laundering from a domestic perspective, its understanding of vulnerabilities from a foreign perspective was limited.
The country’s law enforcement agencies also lacked the necessary skills and competency to investigate money laundering and terrorist financing cases, and its capacity to prosecute such matters was questioned, said the international watchdog.
The country was given until February this year to make necessary regulatory and structural changes.
3. Gold performance lacking:
It looks like gold had a good year if one focuses on its strong run during the last few months of 2022, but at $1 850 per ounce at the end of December, it was struggling to hold on to its modest gain of $50 per ounce over the year.
Then came a slump to just above $1 600 per ounce before it started to run to reach $1 950 a few weeks ago. Since then, it has fallen back to just above $1 800 per ounce.
Gold’s uninspiring performance during the last few years is baffling. The world limped from one crisis to the next, but investors did not flock to the safe haven of gold bars and coins as might be expected.
Covid-19, crashing world economies, China’s broadsides to tech companies that saw share prices collapse, high inflation, rising energy costs, the continuing US and China trade tensions, the invasion of Ukraine and the crash in cryptocurrencies, as well as growing political uncertainties, have had little effect.
Correlation to US
Vaughan Henkel, head of equities and research at PSG Wealth, says the key to the gold price is its correlation to US interest rates.
“Since gold does not pay dividends or interest, it is a relatively expensive asset to hold when real interest rates are high due to the higher opportunity costs of owning non-interest paying assets,” he notes.
“For this reason, US real rates have historically had a negative correlation with the gold price. The gold price tends to increase when real rates decline and decrease when real rates rise.
“In fact, the gold price has run too far during the last few months, when US rates have been increasing,” adds Henkel.
4. Joburg corruption woes:
Sinaye Nxumalo is the new acting head of the City of Johannesburg’s forensics and investigations arm; however, she was a suspect in previous graft probes.
A 2018 KPMG report said that Nxumalo’s contract was unlawfully extended twice in 2015 and that she irregularly appointed her relative as the deputy director of finance without the relevant qualifications.
KPMG recommended that she face criminal sanctions. Reports claimed that an investigation was done by the entity she now heads – a claim the City has denied.
5. R1.8b ship unable to sail:
A R1.8 billion partially built ship remains in Durban harbour after experiencing financial issues, with two key suppliers going out of business due to depressed economic conditions and the Covid-19 pandemic.
New contractors are refusing to supply components for the new hydrography survey vessel, the 95m SAS Nelson Mandela, until they are paid.
Sources involved said that the project is floundering and that many of the jobs created for the ship are in serious danger.
All information sourced from articles posted by: BusinessTech, Moneyweb, News24, and TimesLive.
