In early trade on Thursday, the South African rand hit a fresh three-year low, under renewed selling pressure from the worst power outages on record, which analysts predict could worsen in the coming months.
Eskom, the struggling state power utility, is currently imposing scheduled blackouts lasting more than 10 hours each day for many households and businesses, with lengthier disruptions expected later in the southern hemisphere winter.
Investor sentiment toward the rand has deteriorated significantly this week, with the currency falling to its lowest level against the dollar since May 2020 on Wednesday and falling further on Thursday.
The rand has fallen over 3% versus the US dollar this week, underperforming emerging market counterparts.
According to Rand Merchant Bank analysts in a research report, it is easy to envisage the rand continuing to fall since negative sentiment is now in control.
“We would need to see Eskom come out and give a detailed plan on how they plan to stop the electricity crisis,” said Andre Cilliers, a currency strategist at TreasuryONE. The market is concerned about local economic stagnation, and investors are hesitant to invest in a country with a bleak short-term outlook.”
South Africa’s benchmark 2030 government bond fell early on Thursday, with the yield rising 8 basis points to 10.640%. Reuters/Bloomberg
