News in South Africa 5th April:

1. Eskom testing new plan to cut power demand:

Embattled power utility Eskom says it is piloting a national demand response programme in the small commercial and residential sectors in response to the electricity crisis facing South Africa.

Eskom testing new plan to cut power demand
Photo by Wilson Vitorino

The programme is an expansion of the successful industrial Demand Response Programme, which has been operational for over ten years.

Demand response programmes are agreements between Eskom and participating power users which result in users getting compensation – such as favourable rates or discounts – in exchange for cutting power usage when contractually obligated to.

These times are determined by the system operator, and typically hit during peaks, or when unexpected or unplanned outages occur and demand needs to be reduced to stabilise the grid.

Those contracted with Eskom on the programme currently receive a financial incentive based on actual performance and could potentially be excluded from national load shedding at stages 1 and 2.

This is often reported as load curtailment.

Eskom is now piloting this programme with smaller businesses and energy users, including in the residential sector.

According to the power utility, the objective of the pilot is to test, among others, the appropriateness of technologies, market uptake, and the implementation and participation in this sector.

“The pilot will enable Eskom to evaluate projects on an ongoing basis until the threshold of 50MW has been reached,” it said.

2. Wasteful expenditure exemption withdrawn:

Finance Minister Enoch Godongwana has withdrawn the gazette that offered Eskom an exemption from reporting irregular, wasteful, and fruitless expenditures in its financial statements.

On Friday, Godongwana announced in a Government Gazette that Eskom would be exempted from disclosing irregular, wasteful, and fruitless expenditure in their financial reports.

The Public Finance Management Act requires Eskom to keep full and proper records of its financial affairs and publish annual reports and financial statements.

The Act forces Eskom to “disclose any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the financial year”.

However, Godongwana has removed the need for Eskom to play open cards about irregular expenditure and wasting money in it’s financial statements.

“I hereby exempt Eskom Holdings from the provisions of the [Public Finance Management] Act and the regulations made in terms thereof,” Godongwana said.

The decision caused a severe backlash from various quarters, and Afriforum decided to launch a legal challenge to the decision to award Eskom the exemption.

TimeLive reported that the Democratic Alliance was also gearing up to launch a legal challenge against the exemption.

This morning, Godongwana backtracked on the decision and announced that the exemption was being withdrawn.

He told Parliament that the exemption is withdrawn “for now” while there is further consultation with the auditor-general and Eskom’s auditors.

3. Economists warn risk of total grid collapse is higher:

Eskom has denied that it has put more strain on its generating system in the past few weeks to avoid higher levels of load-shedding.

The response comes after a News24 report in which Nedbank chief economist Nicky Weimar and independent political and economic analyst JP Landman said they believed the threat of a grid collapse was elevated.

Weimar said Eskom’s electricity demand and availability figures suggested the grid was teetering on the edge of a blackout in February 2023.

She questioned whether the recent reduction in load-shedding was possibly a strategy to create the impression that the newly-appointed electricity minister’s work had borne fruit.

Landman alleged that Eskom was manipulating the load-shedding schedule, which he maintained was evidenced by the operating reserve margin deteriorating.

This ratio refers to the gap between peak demand and Eskom’s nominal capacity.

News24 pointed out that the utility had previously acknowledged an “acceptable” margin should be 15% of the nominal capacity.

However, according to the report, Eskom’s operating reserve margin was supposedly negative for most of February and into the first half of March 2023.

Another red flag for the economists was that Eskom had stopped publishing its daily evening peak demand statistics, further fueling speculation that something untoward was happening.

4. Strong close to first quarter for the JSE:

In a quarter filled with surprise monetary policy tightening in major economies, China’s reopening, and a mini banking sector rout in the US, the JSE finished the first three months of 2023 stronger, despite underperforming its global peers.

The JSE All Share Index closed the first quarter to end March 4.2% stronger.

In contrast, the US market, whose equities performed nearly two times better, gained 7.9% over the period.

This was despite contagion in the banking sector of the world’s largest economy, caused by the collapse of Silicon Valley Bank (SVB) and the hawkish stance of the US Federal Reserve, which looks set to continue being cautious, raising fears of more interest rate hikes.

JSE high point

The JSE, which reached record levels when it breached 80 000 points earlier this year, ended January 8.8% stronger. This was on the back of the sooner than expected reopening of the Chinese economy after the relaxation of its strict Covid-19 policies.

Anchor Capital CEO Peter Armitage said the quarter was defined by South African companies – particularly retailers and food producers – performing poorly and firms with global ties, especially to the Chinese economy, doing “pretty well”.

“You had Richemont, Naspers, and British American Tobacco, which all tend to be foreign currency denominated businesses with a swing towards China. And they’re all quite big in the index, so you saw that come through quite a bit,” Armitage said.

Resources dominated over the three-month period.

During the last month of the quarter, which was dominated by the mini banking crisis in the US, the JSE lost more than 2% as the collapse of major financial institutions injected panic in major markets.

Apart from the fall of SVB – which has since been bailed out – markets had to contend with Credit Suisse being on the brink of bankruptcy; it was later rescued by UBS.

Contrary to expectation, the spillover of the banking crisis in the US on South Africa’s banking stocks and “nervousness” around the banking world was limited, Armitage said.

5. Transnet seeks partner to help it lease railway vehicles:

In a move towards third-party access, Transnet has called for partners to help it establish a company to lease rolling stock such as wagons and locomotives to the market.

The move comes in response to domestic and regional demand and is aligned with the policy directive for rail reform.

Transnet Engineering (TE), an operating division of Transnet, issued the request for proposals on Tuesday with a deadline of 30 June 2023.

Transnet said the leasing company “aims to create a more enabling environment by lowering barriers to entry for new train operating companies who will be utilising available slots on the network in line with the regime for third-party access”.

The move follows a meeting with President Cyril Ramaphosa last week in which he directed Transnet to swiftly implement reforms and resolve an economically devastating logistics crisis.

Leasing is an “effective and sustainable global trend among global rail and port operators”, and aims to grow and diversify Transnet Engineering’s revenue sources, while driving demand for its core business of manufacturing, re-manufacturing, maintenance, and engineering services, Transnet said in a statement.

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

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