News in South Africa 5th December:
1. Load shedding issues worsen:
While South Africa’s political space sits in a state of turmoil, the country’s power situation has been there for a long time – and is expected to get worse when Koeberg Unit 1 is pulled offline this week.
On Thursday, 8 December 2022, Unit 1 of the Koeberg Nuclear Power Station will be shut down for normal maintenance and refuelling, and the replacement of the three Steam Generators (SGR) as part of the long-term operation to extend the operating life of Africa’s only nuclear power station.
Koeberg Nuclear Power Station is currently the most reliable in the group’s fleet energy producer in Eskom’s fleet, and its maintenance programme will remove over 900MW – equal to almost one stage of load shedding – from the grid for at least six months.
Following a push to stage 4 load shedding over the weekend, economists at the Bureau for Economic Research (BER) expect rolling blackouts to stick to higher stages for the months to come.
Eskom has emphasised the need to conserve its limited diesel stocks and to create space to replenish dam levels in the pumped storage schemes. The group needs more diesel and more money to buy diesel – but neither of these things is forthcoming.
“After recently receiving some diesel from PetroSA, Eskom pleaded with National Treasury for R19.5 billion to buy diesel to fuel its open cycle gas turbines. Finance minister Enoch Godongwana said the Treasury has no money for this,” the BER said.
“Therefore, elevated levels of load-shedding remain on the cards in the foreseeable future.”
As previously communicated, Stage 4 load shedding is currently being implemented. The schedule for the week continues as follows:
- Stage 4 load shedding will continue until 05h00 on Monday (5 December) morning.
- From 05h00 on Monday, load shedding will be downgraded to stage 3 until 05h00 on Tuesday morning.
- From Tuesday morning, Stage 2 load shedding will be implemented until further notice.
Eskom said it will publish a further update as soon as there are any significant changes.
Schedules:
For people living in the major metros, load shedding schedules are available here:
- City of Johannesburg
- City of Ekurhuleni
- City of Tshwane
- City of Cape Town (PDF)
- Nelson Mandela Bay
- eThekwini
- Manguang
- Buffalo City
For access to other load shedding schedules, Eskom has made them available on loadshedding.eskom.co.za.
2. Oil prices may hit $110 a barrel:
Brent crude oil could climb as high as $110 per barrel in 2023, though there are several risks that could add more pressure on prices, according to a note from Bank of America.
Prices for the international oil benchmark averaged around $101 per barrel this year, and BofA sees more of the same next year, predicting an average of $100 and a peak of $110 at the height of the driving season. Brent will generally be lower in the first quarter of 2023, compared to the rest of the year, analysts added.
Brent currently trades around $86 per barrel, meaning the high end of BofA’s forecast represents an increase of 28%.
But BofA analysts also noted several upside risk factors for oil prices next year, namely a price cap on Russian crude.
On Friday, European Union officials agreed to set the cap at $60 per barrel. That will take effect on Monday, alongside a ban on Russian oil imports into the EU and related services for cargoes worldwide. Russia has said it won’t sell oil to any price-cap participants, and analysts have estimated its oil exports could fall by up to 1 million barrels per day.
“At present, we embed Russian total oil production levels of 10 mn b/d in our assumptions for 2023 compared to the 9.59 mn b/d figure provided by the IEA. Any meaningful downward deviation from these figures could turbocharge oil prices higher,” the BofA note said.
Russia presents the largest upside risk to oil prices, but there are other risks lurking as well, analysts said. In particular, further supply disruptions from OPEC producers like Libya, Nigeria, Iraq or others could “put the oil market on notice.”
A shortfall of 1 million barrels a day or more could come from a number of producers, especially from OPEC, with BofA estimating that every unexpected swing in supply or demand of 1 million barrels tends to move Brent oil prices by $20-$25 per barrel.
3. New car prices rising:
New car price increases in South Africa – which, surprisingly, have lagged the country’s rising inflation rate – are now surging.
The latest TransUnion Vehicle Pricing Index released on Monday (5 December)) shows that the rate of increase in new vehicle prices accelerated to 6.8% in the third quarter of 2022 from 3.8% in the third quarter of 2021.
This follows the rate of change in new vehicle prices surprisingly declining to 3.9% in the second quarter of this year, from 6% in the first quarter.
Although the rate of increase in new vehicle prices surged significantly in the third quarter, it is lower than headline consumer inflation, which edged up to 7.6% in October (September: 7.5%), after hitting a 13-year high of 7.8% in July.
During JSE-listed vehicle retailer Combined Motor Holdings’ interim financial results presentation in October, CEO Jebb McIntosh forecast that new vehicle prices were expected to increase by up to 10% within the next four months.
However, Toyota South Africa Motors dismissed this forecast, with president and CEO Andrew Kirby stating that Toyota believed that from a total industry perspective there would probably be moderate consumer price index- (CPI-) related new vehicle price increases in the country.
Automotive business council Naamsa last week reported that South Africa’s new vehicle market registered its 11th consecutive month of year-on-year growth in November, with year-to-date sales, at 486 895 units, now 13.6% higher than the corresponding 11-month period in 2021.
4. SA’s a hostage to Cyril scandals:
The scandal threatening the future of Cyril Ramaphosa’s presidency rattled South Africa’s financial markets and the instability risks inflicting more damage still on the country’s currency and bonds.
There’s no obvious long-term successor to lead the country if the crisis ends up costing the president his job, so it’s unclear what would happen to his reform agenda, which is aimed at kick-starting start one of Africa’s largest economies. That, investors say, is a recipe for more outsized swings in the rand, which saw its implied volatility this week soar to a level last seen in 2020 when the global economy was reeling from the onset of the Covid pandemic.
“The immediate focus remains on whether the president resigns or fights on,” said Matete Thulare, the Johannesburg-based head of foreign-exchange execution at Rand Merchant Bank in a note to clients. “Rightly or wrongly, if he goes, voluntarily or otherwise, the rand will run again.”
When news broke that Ramaphosa could face impeachment due to a potential constitutional breach, traders responded by taking an axe to the currency and pushing the country’s borrowing costs up by the most since 2015. The cost of insuring the debt against default jumped and South African bank stocks posted the worst one-day loss in more than two-and-a-half years.
The rand enjoyed a bit of respite on Friday, paring some of its weekly decline after Finance Minister Enoch Godongwana said there was just a 10% chance of Ramaphosa leaving office. African National Congress (ANC) officials are expected to continue discussing the matter over the weekend, with investors eager for any updates.
The nation’s currency, which is often seen as a proxy for risk appetite in emerging markets, has lost about 9% against the dollar so far this year. The rand closed Friday at 17.5052 per dollar, and the yield on 10-year sovereign local bonds was at 11.3%.
“It’s a very fluid situation, and anything can happen still,” said Brad Bechtel, a New York-based currency strategist at Jefferies. “Even if he does resign, it won’t change the broader backdrop in South Africa, which still has some challenge ahead of it.”
5. Ambulance shortage:
South Africa’s provinces have half the ambulances they actually need, health minister Joe Phaahla has admitted.
The government aims for a ratio of one ambulance per 10,000 people on average, but due to staff shortages, provincial health departments are operating only 49% of the 6,824 ambulances needed to meet this target.
The North West is in the worst position, the data shows.
All information sourced from articles posted by: BusinessTech, Business Insider, Moneyweb, Fin24, and BusinessLive.
