News in South Africa 26th January:

1. Sarb expected to moderate rate hikes:

South Africa’s central bank is set to moderate its most aggressive interest-rate hiking cycle in at least two decades Thursday, and economists and traders will be on high alert for any signs of a pivot away from policy tightening.

Sarb expected to moderate rate hikes
Photo by cottonbro studio

The median expectation of economists in a Bloomberg survey is that three members of the monetary policy committee will vote in favor of a 50 basis-point hike, and the other two for a quarter-point increase. The panel has lifted borrowing costs by 75 basis points in each of its last three meetings.

Sourced from Moneyweb

The South Africa Reserve Bank typically moves in increments of 25 basis points, and another increase would take the benchmark repurchase rate to the highest level in almost 14 years. It would also result in a positive real interest rate, potentially making local assets more attractive to foreign investors and creating room for the MPC to start thinking about ending the hiking cycle.

The MPC under Governor Lesetja Kganyago has frontloaded its fight against inflation: At 7%, the key rate is already higher than the year-end 2025 level that its quarterly projection model suggests it should be. Economists in a separate Bloomberg survey see the key rate peaking at 7.5% by the end of this quarter, with a gradual easing of borrowing costs starting in the fourth quarter.

While major global central banks are expected to down-shift or even pause their hiking cycles, a “number of idiosyncrasies” in South Africa’s inflation and policy dynamics may see the MPC maintain a hawkish and cautious stance, said Jeffrey Schultz, BNP Paribas’s chief economist for the Middle East and Africa. The benchmark will probably peak at 7.75% by the end of March, with modest rate cuts likely from the second quarter of next year, he said.

2. Load shedding back at stage 5:

Failing national power utility Eskom has announced that stage 4 and 5 load shedding will be implemented from 05h00 on Thursday (26 January) morning until Sunday afternoon.

According to the company, load shedding has had to be pushed to a higher stage as a result of losing a generation unit each at Camden, Kendal, Lethao and Majuba power stations over the past 24 hours.

Eskom said that returning generating units back to operation at each Matla and Tutuka has been delayed.

“Two generating units at Kriel, a unit each at Majuba and Tutuka power stations have been returned to service,” said Eskom.

The company added that planned maintenance sits at 6,462MW while the current amount of generating capacity is 15,977MW.

Schedules 

For people living in the major metros, load shedding schedules are available here:

For access to other load shedding schedules, Eskom has made them available on loadshedding.eskom.co.za.

3. Municipalities not liable during load shedding:

Municipalities across South Africa say they are not liable for damages to electric appliances or spoiled food and will only pay out a claim if the city is found to be negligent.

eThekwini municipal spokesperson Msawakhe Mayisela said that the city expects an increase in the number of claims due to higher stages of load shedding.

Mayisela said that the city does not have the budget for these claims. If a claim is accepted, it is settled by the city’s insurance.

4. Cost to produce chicken surpasses selling price:

Astral Foods, one of South Africa’s largest poultry producers, says the cost to produce chicken now exceeds its selling price by at least R2 per kilogram due to the damaging effects of endless load shedding.

The impacts of South Africa’s worsening power crisis on the poultry sector spell trouble for already-under-pressure consumers.

Prices of chicken, which has remained the cheapest source of protein in the country, are expected to increase as a result, analysts have said.

In a voluntary trading update indicating that it expects to report a 90% plunge in earnings for the six months to end March, Astral said on Wednesday that it expects its poultry division to incur significant losses for the period following severe operational disruptions and abnormal spending due to continuous power outages.

During the period, Astral has seen a production cutback of at least 12 million broiler placements and a backlog in its slaughter programme resulting in heavier birds consuming higher levels of feed.

“Excessive processing costs are being incurred as additional shifts are being implemented to try and address the substantial backlog in the group’s integrated broiler supply chain,” Astral said.

Effectively selling at a loss of R2 for each kilogram of chicken it produces, Astral said it is unable to implement price increases and will continue to “subsidise” the increased production cost in a bid to avoid passing it on to consumers.

5. Big rush for power backup products:

With SA bracing itself for the likelihood of ongoing load shedding for the foreseeable future, retailers are gearing up for a surge in demand for inverters, generators and gas appliances.

Major retailers canvassed by reporters have all increased their volumes anticipating an uptick in demand as consumers try to adapt to a world of constant power supply disruptions.

But even anticipating an uptick in demand does not mean there will not be a shortage of items such as inverters and generators down the line.

French-headquartered DIY group Leroy Merlin, which has been operating in SA for the past six years, years said this week that even with forecasts in place with suppliers, its current supply of generators and inverters is erratic, as demand has increased.

“Stock is secured as soon as it is available,” a spokesperson told reporters. New stock lands at least once a week.

At the same time, South Africans are looking at other options to cope with power supply interruptions, including solar options, which may ultimately also affect the demand for inverters and generators.

The company said that while it foresaw increased demand for inverters and generators after the announcement of continued load shedding over the next two years, it was also cognisant of the increasing popularity of other solutions in the market, including the renting of solar and other solar leasing options. 

“We are still, however, pursuing new options that will allow us to increase the product offering in store as well as have a more consistent supply of stock should the demand continue. We will also focus more effort on advising customers on the right products to purchase.”


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

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