South Africa’s Rand and Bonds Fall Amid Eskom Power Cut Warning
TLDR
- Eskom Holdings SOC warned of potential power cuts for the first time in nearly 10 months
- The rand weakened 0.2% to 18.6289 per dollar, while government bond yields climbed
- The warning comes just a day after Eskom reported its first profit since 2017
South Africa’s rand weakened 0.2% to 18.6289 per dollar, while government bond yields climbed after Eskom Holdings SOC Ltd. warned of potential power cuts for the first time in nearly 10 months. The state-owned utility said it may implement rotational blackouts over the weekend to repair breakdowns and replenish reserves.
The warning comes just a day after Eskom reported its first profit since 2017, underscoring ongoing challenges despite recent improvements in supply stability. Past outages have cost the economy up to 899 million rand ($48 million) per day, according to central bank estimates.
Eskom’s dollar bonds also fell, with the yield on 2028 notes rising seven basis points to 7.19%. The yield on 2035 government bonds climbed six basis points to 10.39%, reflecting investor concerns over power-related economic risks.
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Key Takeaways
Eskom’s progress in stabilizing South Africa’s power grid had bolstered market sentiment, but the latest power cut warning revives economic concerns. Persistent load shedding has been a major drag on growth, limiting industrial productivity and business confidence. The rand’s decline and rising bond yields suggest that investors remain sensitive to Eskom’s operational stability. The utility’s financial turnaround, marked by its first profit in six years, contrasts with ongoing reliability issues. While external risks such as global market volatility influence South African assets, Eskom’s potential outages remind investors that domestic structural issues remain a key threat to economic recovery. Investors will closely watch Eskom’s ability to maintain grid stability and minimize disruptions in the months ahead.
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