By Garth Theunissen April 8 (Bloomberg) -- The rand declined the most in two weeks on concern South Africa’s state power utility won’t receive a World Bank loan for expansion, damping capital inflows and economic growth. The rand dropped for a third straight day, losing as much as 1.1 percent to 7.3591 per dollar, the weakest level since March 31. Eskom Holdings Ltd., which supplies about 95 percent of South Africa’s electricity, is seeking a $3.75 billion loan to help build the coal-fired Medupi plant. Three U.S. lawmakers are seeking more environmental commitments for the loan, while the London-based Times said this week pressure from environmental activists may prompt the U.K. to block the bid. A decision is expected late today, Johannesburg time. “There will be negative implications for the economy if there’s not enough financing to ensure South Africa’s future power needs, so the rand will come under pressure if the loan is refused,” said Elisabeth Gruie, an emerging-markets currency strategist in London at BNP Paribas SA, France’s biggest bank. “The loan would also be supportive of foreign-currency inflows.” Three U.S. lawmakers whose committees oversee World Bank policy and funding have asked for more environmental and social commitments from Eskom related to the 4,800-megawatt coal plant, which is likely to be the world’s fourth-largest. Finance Minister Pravin Gordhan last week said South Africa won’t agree to any conditions to obtain the loan. Supply Crucial “From a longer-term perspective, the issue of secure electricity supply is crucial for the rand,” said John Cairns, head of foreign-exchange research at Rand Merchant Bank in Johannesburg. The rand may lose as much as 10 South African cents if the loan is refused later today, Cairns added. The World Bank will announce its decision at 8 p.m. South African time, RMB said in a client note today. The World Bank declined to comment on the decision. The plant is “critical” in addressing South Africa’s power shortage, Public Enterprises Minister Barbara Hogan said last month. South Africa’s currency traded at 7.33315 at 11:53 a.m. in Johannesburg, from a close of 7.2762 yesterday. The rand weakened versus all but two of its 16 most- actively traded currencies monitored by Bloomberg as lower prices for gold and platinum, South Africa’s biggest exports, dimmed earnings prospects for the country’s mines. Gold snapped a three-day rally, losing as much as 0.7 percent to $1,144.05 an ounce while platinum slid 1.3 percent to $1,697.18 an ounce. “The rand is tracking other commodity currencies lower,” said BNP’s Gruie. The rand lost 0.6 percent against the euro, to 9.7806, from a close of 9.7181 yesterday. Government bonds fell, pushing up the yield on the benchmark 13.5 percent security due September 2015 by six basis points to 7.98 percent. The bond’s price fell 29 cents to 123.89 rand. --Editors: Stephen Kirkland, Gavin Serkin To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Source