News in South Africa 5th September:
1. Stage 6 load shedding:
Power utility Eskom has announced that load shedding will be escalated to stage 6 indefinitely.
With the increase in generation planned maintenance, as well as the loss of a further two generation units on Monday, the utility said that Stage 6 load shedding will be implemented from 05h00 on Tuesday until further notice.
“Overnight, a further two units at Lethabo and Matla power stations will need to be shutdown for urgent repairs,” it said.
Eskom will publish another update should any significant changes occur.
Breakdowns are currently at 16,210MW of generating capacity while the capacity out of service for planned maintenance is 5,894MW.
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. Huge diesel, petrol price hikes confirmed:
South Africa’s diesel price will this week climb by the most in three years, spurred by higher international fuel costs and a slump in the rand, adding to upside risks to inflation.
Fuel costs will increase by the most in 14 months.
On Wednesday, the petrol price (both 93 and 95 unleaded) will be hiked by R1.71 a litre. The wholesale price of diesel will be increased by a painful R2.84 a litre. According to the Automobile Association (AA), this is a record price increase.
Illuminating paraffin prices will be hiked by R2.78 a litre.
A litre of 95 unleaded petrol will now cost R24.54 in Gauteng, the highest level since August 2022. Meanwhile, the wholesale price of diesel in Gauteng will now be R23.05 a litre, a new high for 2023. In July last year, diesel reached a record high of R25.40.
South African fuel prices are largely determined by international oil costs and the rand exchange rate, as oil is priced in dollars.
In a statement, the Department of Mineral Resources and Energy said the average Brent crude oil price increased from $79.75 a barrel to $84.78 over the past month due to production cuts by Saudi Arabia.
“High prices of petrol are as a result of low inventories and refinery outages, which affected the production of blending components used in summer grade petrol making it more expensive to produce.
“Diesel and paraffin prices increased because of lower shipments of Russia’s Urals crude oil which is rich in middle distillates, as well as rising demand of middle distillates ahead of the winter season in the Northern Hemisphere,” the department said.
The average level of the rand-dollar exchange rate declined from R18.28 to R18.67 over the past month.
3. Collapsing infrastructure chases investors away:
Nedbank CEO Mike Brown said South Africa’s collapsing infrastructure prevents companies from investing in South Africa.
Brown shared this information during News24’s “On the Record” summit, where experts discussed the country’s biggest issues.
He said large corporate customers need South Africa’s infrastructure to work before investing in new mines, factories, and other businesses.
“So much of our economic infrastructure, including energy and logistics, are under the control of state-owned monopolies, and it does not work,” he said.
When there is insufficient energy, or the railway system does not work, companies cannot invest in new projects.
He said Nedbank was doing an international investment roadshow in March and April this year and was faced with a tough question.
“We sat with a United States pension fund investing in assets worldwide. Their one-liner was, ‘How can we invest in a country which can’t keep its lights on?’” Brown said.
To attract new investment, South Africa must fix the infrastructure side of the economy, like electricity and logistics.
“Unless we do that, there will not be large-scale investment. Nobody will put money into the country without it,” he said.
He highlighted that corporate customers spend money to keep their existing businesses competitive. However, there is very little investment in new projects.
There is one exception – energy. “We are seeing a tsunami of energy investments,” Brown said.
4. Chicken price still to climb:
The country’s shoppers need to brace themselves for longer pauses at retail store freezers. Chicken prices are expected to keep rising as poultry producers struggle with profit-restraining input costs.
Speaking to Moneyweb following the release of RCL Foods’ 2023 financial results on Monday, CEO Paul Cruickshank did not indicate a nearing end to elevated chicken prices. This comes as poultry industry players, including its own Rainbow businesses, continue to battle higher operational costs, which have been pushed mainly by elevated raw material prices.
“The chicken prices do need to increase; I mean, our results are clear in the losses we’ve posted for Rainbow, and the competitors will be very similar. We are up against a consumer who can’t afford to pay… but chicken businesses across the country are making losses.”
“What we really need is for a better supply-demand balance in the country, which import duties will help with. The second thing chicken [producers] really needs is the reduction in the raw material costs, and then that will bring a better balance between what the producer makes and what the consumer [affords],” he added.
According to a fact sheet provided by RCL, it has seen a 13.6% rise in Safex Yellow Maize prices from an average price of R3 852 per ton in 2022 to an average of R4 377 per ton this year. Additionally, the global price of CME Soya rose 12.8% to $449 per ton, while Safex wheat prices increased by 7.2% over the last year to an average price of R6 846 a ton.
Yellow maize and soybean are key ingredients used in animal feed along with, in some cases, wheat and white maize.
Although the chicken business reported an 18.3% rise in revenue for the period to R13.46 billion – supported by strong demand, increased market share and higher prices in the fast-food sector, this was not enough to offset cost pressures in the business.
Rainbow which includes the grain-based animal feed operations, marked a 74.5% decline in Ebitda (earnings before tax, interest, depreciation and amortisation) to R86 million, compared with R342.9 million in 2022.
This is the largest Ebitda drop for the group’s continuing operations. The Ebitda margin for Rainbow dropped 2.7 points to 0.3%.
5. Food inflation threat isn’t over:
AVI, the owner of Bakers and Five Roses, is concerned that further rand volatility and load shedding will bring more inflationary pain.
Load shedding, in particular, has been a big cost driver for food producers.
AVI noted that selling price increases helped the group lift revenue 7.8% to R14.9 billion, though operating profit grew 6.9% to R2.7 billion as power cuts cost the producer R58 million in its year to end-June.
“Load shedding is not a trivial issue; it’s a big problem.
Some things have to fundamentally change for the inflation rate to come back,” said AVI CEO Simon Crutchley.
All information sourced from articles posted by: BusinessTech, Fin24, DailyInvestor, Moneyweb, and News24.
