News in South Africa 7th March:
1. New minister of electricity:
President Cyril Ramaphosa has announced changes to his executive – including two new ministries.
During a twice-delayed address to the nation on Monday (6 March), the president revealed that Kgosientsho Ramokgopa would be appointed as the country’s new minister of electricity.
He also revealed that Maropene Ramokgopa would be appointed as minister for planning, monitoring and evaluation – another new ministry in the presidency.
The president said that he realises that a second new minister is adding to the number of executives in his cabinet, but said that ministries would be reduced in the future.
Kgosientsho Ramokgopa was heavily rumoured to be the president’s favoured candidate for the minister of electricity.
The minister’s role is to significantly reduce the frequency of load shedding as a matter of urgency and also oversee the overall response. He will have authority over the Energy Action plan, and will be given certain powers by the president to do so.
The minister will remain in office until the crisis is dealt with. Ramaphosa described it as a “transitory” ministry.
The table below outlines the new executive (ministers only):
| Position | Minister | Shuffled Out |
|---|---|---|
| Deputy President | Paul Mashatile | David Mabuza (resigned) |
| Minister of Electricity | Kgosientsho Ramokgopa | New Department |
| Minister for planning, monitoring and evaluation | Maropene Ramakgopa | New Department |
| Minister in the Presidency | Khumbudzo Ntshavheni | Mondli Gungubele |
| Minister of Women, Youth and Persons With Disabilities | Nkosazana Dlamini-Zuma | Maite Nkoana-Mashabane |
| Minister of Agriculture, Land Reform and Rural Development | Thoko Didiza | |
| Minister of Basic Education | Angie Motshekga | |
| Minister of Communications and Digital Technologies | Mondli Gungubele | Khumbudzo Ntshavheni |
| Minister of Cooperative Governance and Traditional Affairs | Thembi Nkadimeng | Nkosazana Dlamini-Zuma |
| Minister of Defence and Military Veterans | Thandi Modise | |
| Minister of Employment and Labour | Thulas Nxesi | |
| Minister of Environment, Forestry and Fisheries | Barbara Creecy | |
| Minister of Finance | Enoch Godongwana | |
| Minister of Health | Joe Phaahla | |
| Minister of Higher Education, Science and Technology | Blade Nzimande | |
| Minister of Home Affairs | Aaron Motsoaledi | |
| Minister of Human Settlements | Mmamoloko Kubayi | |
| Minister of International Relations and Cooperation | Naledi Pandor | |
| Minister of Justice and Correctional Services | Ronald Lamola | |
| Minister of Mineral Resources and Energy | Gwede Mantashe | |
| Minister of Police | Bheki Cele | |
| Minister of Public Enterprises | Pravin Gordhan | |
| Minister of Public Service and Administration | Noxolo Kiviet | Thulas Nxesi (acting) |
| Minister of Public Works and Infrastructure | Sihle Zikalala | Patricia de Lille |
| Minister of Small Business Development | Stella Ndabeni-Abrahams | |
| Minister of Social Development | Lindiwe Zulu | |
| Minister of Sports, Arts and Culture | Zizi Kodwa | Nathi Mthethwa |
| Minister of Tourism | Patricia de Lille | Lindiwe Sisulu |
| Minister of Trade, Industry and Competition | Ebrahim Patel | |
| Minister of Transport | Sindisiwe Chikunga | Fikile Mbalula (resigned) |
| Minister of Water and Sanitation | Senzo Mchunu |
2. Food price warning:
Consumer goods group AVI says consumers have still not fully felt the costs for food producers of load shedding.
AVI added that the relief from the recent diesel fuel levy announcement will be minimal, as, at worst, it could just offset the cost of five hours of backup power daily.
Load shedding cost the business R22 million, but spent over R250 million increasing its inventory due to fears regarding the effects of power cuts on its suppliers.
3. Nersa U-turn on gas generation:
Energy regulator Nersa recently decided to concur with Minister of Mineral Resources and Energy Gwede Mantashe’s approval of an Eskom request to build a 3 000 megawatt (MW) gas power station in Richards Bay.
The project is expected to be completed in 2028 at the latest and will generate enough energy to mitigate at least three stages of load shedding.
The approval comes after Nersa rejected the very same request in December because, it argued, Eskom followed the wrong process and did not need its concurrence.
The regulator now sits with two conflicting decisions and will approach the High Court to set aside the first, since Nersa lacks the power to overturn its own decision.
This bizarre turn of events comes after Nersa based its rejection on outdated regulations, according to Nhlanhla Gumede, full-time regulator member for electricity.
Nersa regularly publishes the agenda of its regulator meetings, which are open to the public. The item was on the agenda for its 23 February meeting, but it was decided during the meeting that it should be dealt with behind closed doors. Nersa has not yet published the decision, but Gumede disclosed it when asked during a telephonic interview.
Funding
In the meantime, National Treasury has put the brakes on Eskom’s ability to borrow money and execute new capital projects in power generation.
As part of the condition attached to the R385 billion debt relief package announced in his recent budget speech, Finance Minister Enoch Godongwana has restricted Eskom’s ability to borrow further for the next three years and has limited its spending on new capital projects to those in the area of transmission and distribution.
Gumede said this may not necessarily preclude Eskom from proceeding with the project, if it keeps it off its own balance sheet.
4. Critical change needed:
Nedbank chief executive officer Mike Brown says that South Africa’s economy can no longer suffer the dithering and inaction from the government in dealing with various crises it faces.
Commenting on the state of the economy in the bank’s financial results for the year ended December 2022, the CEO said that urgent and decisive leadership, action and delivery are desperately needed in the country.
Brown said that economic conditions deteriorated further over the final quarter of 2022 as the country’s electricity crisis worsened, global growth slowed, commodity prices dipped, and the pressure on household income from the earlier inflation surge and the interest rate increases intensified.
Network infrastructure – mainly provided by state-owned monopolies and needed to enable higher levels of GDP growth and sustainable job creation in South Africa – has been deteriorating over many years, including, in particular, the crises being experienced in the areas of electricity supply and distribution, transport and logistics, and water infrastructure.
In addition, municipal service delivery is poor, and crime and corruption levels are unacceptably high, he said.
“These are critical foundations required for business confidence, sustainable investment, higher economic growth and job creation as well as fiscal sustainability, and more urgent action is needed.
“Progress on structural reforms to address these matters has been far too slow, and the will of the political and public sector to make meaningful changes is uneven and actual delivery is poor.
“This cannot continue. More urgent and decisive leadership and action is required,” the chief executive said.
5. Dollar starting to wane:
Traders in options on South Africa’s rand are starting to bet that King Dollar’s best days are over.
The cost of hedging against rand declines, as measured by the premium of options to sell the currency over those to buy it, fell to about 190 basis points on Friday, according to data compiled by Bloomberg. That’s less than half the long-term average, and the lowest since early 2006, when the rand was buoyed by the commodities super-cycle that peaked two years later.
The rand — often seen as a proxy for emerging-market sentiment — has weakened more than 6% against the greenback this year. While part of that move was due to dollar strength and expectations of further US policy tightening, the South African currency has also been hammered by local factors, including a deepening energy crisis. Most of the bad news may now be priced in, if the risk reversals on currency options are any indication.
So-called dollar-rand risk reversals in shorter tenors are also at multi-year lows, suggesting “that the pressures on the rand may well dissipate in the coming months,” economists at Rand Merchant Bank wrote in a client note this week.
That’s good news for the rand’s emerging-market peers, most of which have also seen risk reversals trending lower. The MSCI EM Currency Index has slumped almost 2% since the beginning of February amid a dollar bounce.
But the options pricing suggests traders are starting to position for a prolonged weakening trend in the dollar once the Federal Reserve’s policy rate peaks.
All information sourced from articles posted by: BusinessTech, News24, Moneyweb, and Fin24.
