On the concern that power shortages are set to worsen.
The rand fell to the weakest level in a month against the dollar, retreating for a fourth day on concern electricity supply constraints caused by maintenance work will weigh on the economy.
Eskom Holdings SOC Ltd., the state-owned company that generates about 95% of South Africa’s power, said it can’t delay maintenance on nine units as it expects an “extremely cold” winter. The rand fell 15% against the dollar in the first quarter of 2008, when coal shortages and maintenance at power plants forced Johannesburg-based Eskom to cut electricity to the nation’s mines.
“If you have supply constraints, the knock-on effects on the economy could be quite considerable,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg.
The rand declined as much as 0.9% to 9.3111 per dollar, the worst level since March 25, and was trading 0.4% down at 9.2612 per dollar by 11:53 a.m. in Johannesburg. The currency slid 3.2% last week, the worst performance since October. Yields on 10.5% bonds due December 2026 rose for the first time in five days, adding one basis points, or 0.01% point, to 6.90%.
Growth Threat
Eskom will take 2 000 megawatts of generation capacity out of production for maintenance, Chief Executive Officer Brian Dames told reporters in Johannesburg today. Shortages are at similar levels now to five years ago, threatening gold and platinum output and the nation’s 2013 growth forecast of 2.7%. Supplies will be tight this winter, which runs from about May to August, Public Enterprises Minister Malusi Gigaba said.
A strike by the South African Transport and Allied Workers’ Union which brought privately operated commuter bus services in major cities to a standstill also weighed on the rand, Nalla said. The rand may decline to 9.44 per dollar after breaching 9:30, a significant support level for the currency, he added.
South Africa’s currency headed for its longest retreat since January, extending a slide triggered by concern slowing growth in China, the biggest buyer of South African raw materials, will hurt demand for industrial metals. An earthquake in China’s Sichuan province may further damp demand. Metals and other commodities accounted for 53% of South Africa’s exports in 2012.
Commodity Link
“Rand weakness in response to news out of China has been mainly via the commodity price, terms-of-trade and export-demand channel,” Bruce Donald, a strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “The rand is a cyclical and commodity currency.”
China’s magnitude 6.6 earthquake hit Sichuan province on April 20. The death toll climbed to 188 today with more than 11 500 injured.
Commodity prices have tumbled since April 15, when China’s National Bureau of Statistics said gross domestic product slowed to 7.7% in the first quarter from a year earlier.
Copper declined for a fifth consecutive week and dropped into a bear market last week. Aluminum, tin, zinc and nickel also retreated.
