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South Africa’s rand clings on to gains despite downgrade fallout

Comments (0) Economy, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand edged firmer on Wednesday, clinging on to recent gains despite continued fallout triggered by a Moody’s ratings downgrade last week and an anticipated interest rate hike by the U.S. Federal Reserve.

At 0640 GMT, the rand traded 0.2 percent firmer at 12.7350 per dollar compared to close of 12.7600 overnight in New York, bringing weekly gains to around 1.3 percent.

Following a one notch downgrade to its lowest sovereign investment grade on Friday, Moody’s cut the ratings of a dozen banks and companies including embattled power utility Eskom, further shaking confidence in Africa’s most advanced economy.

Quarterly business confidence and April retail sales due in the session are expected to shed more light on ailing economy. Growth shrunk 0.7 percent in Q1 2017 after a 0.3 percent contraction in Q4 of 2016.

Traders expect the U.S. central bank to increase interest rates by a notch when it concludes a policy meeting on Thursday, a move that could dampen demand for high-yielding emerging market assets.

South African bonds were flat, with the yield on benchmark 2026 government bond inching up 0.5 basis points to at 8.445 percent.

Stocks set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.3 percent.


(Reporting by Mfuneko Toyana; Editing by Ed Cropley)


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South African court sets aside Eskom’s electricity tariff hikes

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – A South African court on Tuesday struck down some of the tariff increases granted to Eskom this year, saying the power utility had not followed the correct procedure when applying for a special claw-back, local media reported.

National energy regulator (Nersa) in March allowed Eskom a total tariff hike of 9.4 percent, of which part was an interim increase for running expensive diesel generators to keep the lights on in Africa’s most industrialised economy.

A court in Johannesburg on Tuesday granted the application by business organisations to set the regulator’s decision aside.

Had the interim increase not been granted, the tariffs would have risen by 3.5 percent from April 1, Moneyweb reported.

Eskom would not comment on the court’s decision directly, saying in a statement it would await a decision by the regulator.


(Reporting by TJ Strydom)

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Thousands more workers to join strike at South African power utility

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Thousands more workers at South African power stations plan to join a strike on Wednesday over pay at state-run utility Eskom, their union said on Tuesday.

The strike began on Monday when about 1,500 members of the National Union of Mineworkers (NUM) downed tools after wage talks stalled. Eskom branded the stoppage illegal because its members are prohibited by law from striking, but said its operations had not been affected so far.

The union said that all of its 15,000 members at the utility, or close to a third of Eskom’s workforce, will stop work on Wednesday. Tuesday was a public holiday in South Africa.

“It is going to be a total withdrawal of labour by our members. NUM members will be striking for the right to strike at Eskom,” the union said in a statement.

Eskom could not be reached for comment on how its operations would be affected on Wednesday.

Eskom said on Monday that arbitration over the wage dispute was continuing. The utility is offering pay hikes of 7 to 9 percent while NUM is looking for increases of 12 to 13 percent.

The labour dispute is the latest problem to beset cash-strapped Eskom, which has struggled to meet power demand in South Africa due to its aging power plants and grid. However, it has managed a year without rolling blackouts that have hurt the economy in the past.


(Reporting by James Macharia; Editing by Susan Fenton)

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Wage strike starts at South Africa power utility Eskom, supplies stable

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Workers downed tools Monday at three South African power stations with more set to follow as a wage strike began at state-run utility Eskom, but the company said its operations had not yet been impacted and branded the stoppage illegal.

Paris Mashego, NUM’s energy sector coordinator, told Reuters that wage talks with the utility were in deadlock over the weekend. Eskom provides almost all the power to Africa’s most industrialised economy but it was not immediately clear what impact the strike may have on its ability to keep the lights on.

An Eskom spokesman said operations had not yet been impacted and reiterated the utility’s view that its members are prohibited by law from striking.

“Across all of our 27 power stations everything is operating as normal at this stage,” spokesman Khulu Phasiwe said.

“And no one from Eskom is allowed to go on strike because we are defined as essential service providers. Technically anyone who is not at work today will have to explain themselves to their bosses,” he said.

He added that Eskom did not feel that negotiations had collapsed. The utility is offering pay hikes of 7 to 9 percent while NUM is looking for increases ranging from 12 to 13 percent.

Phasiwe also said NUM members early on Monday morning had blocked roads leading to the Arnot power station east of Johannesburg but police had been called in and the roads were now clear.

NUM has around 15,000 members at Eskom, close to a third of its workforce.

The stoppage coincides with a wage strike by around 15,000 workers in the petrochemical industry that has led to some shortages and was entering its second week on Monday.


(Reporting by Ed Stoddard; Editing by James Macharia)

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South Africa’s Eskom expects increase in export sales

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s state power utility Eskom expects a significant increase in export sales in the near future, its chief financial officer said on Tuesday.

“We foresee quite a significant increase in export sales,” chief financial officer Anoj Singh told a news conference, adding that in 2015 Eskom achieved a 12 percent rise in export earnings.


(Reporting by TJ Strydom; Writing by Nqobile Dludla; Editing by Joe Brock)

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South Africa’s Eskom raises wage offer to union to 7%: NUM

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African power utility Eskom has raised its wage offer to 7 percent from 5.75 in negotiations with workers, the National Union of Mineworkers (NUM) spokesman said on Wednesday.

“NUM is going to seek a mandate from its members about Eskom’s latest offer, then we will respond to the management,” Livhuwani Mammburu said. The offer was still below NUM’s demand of a 15 percent increase for the least-paid workers.

The utility employs over 42,000 people with NUM representing more than 14,000 of workers.


(Reporting by Tanisha Heiberg; Editing by James Macharia)

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South Africa’s Eskom says Majuba rail line to be completed in 2017

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African electricity utility Eskom said on Thursday that construction of a railway line linking its Majuba power plant with the main coal line would be completed at the end of 2017.

The 68-kilometre corridor is the first large green field freight rail infrastructure project to be carried out in South Africa since 1986, Eskom said.



(Reporting by Tiisetso Motsoeneng; editing by Jason Neely)

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South Africa’s Eskom rules out bond issue for now: CEO

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – The boss of South African utility Eskom has ruled out for now issuing bonds to help fund $21 billion of new power plants, saying on Tuesday the credit market was not favourable.

The state-owned company, which provides virtually all of South Africa’s electricity, is building three new power plants to help shore up power reserves, and expects to add 5,620 megawatts (MW) to the network by 2018.

“We will only issue a bond based on market conditions. At the moment they don’t seem very favourable,” chief executive Brian Molefe told Reuters on the sidelines of a company function.

Molefe, drafted in last April from state rail and freight firm Transnet to stabilise the power producer and help it keep the lights on, said Eskom was instead in talks with banks about multi-lateral loans.

“We have the option of going to banks and DFIs (development finance institutions) for multi-lateral loans, which is what we are negotiating now,” he said.

But Molefe said the Eskom, whose Ba1 credit rating is under review by Moody’s for potential downgrade, was not under any liquidity pressure because it had raised enough money to cover its capital needs for both the 2016 and 2017 fiscal years.

Eskom faced a crippling cash crunch last year that forced the government to inject nearly 80 billion rand in equity. The utility also had to impose almost daily rolling power cuts that hurt economic growth to prevent the grid from collapsing.

Eskom has said it does not expect power cuts this year.

($1 = 15.4771 rand)


(Reporting by Tiisetso Motsoeneng; Editing by Mark Potter)

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South Africa guarantees Eskom’s power purchase agreements

Comments (0) Africa, Business, Latest Updates from Reuters

CAPE TOWN (Reuters) – Power purchase agreements between South African power utility Eskom and independent power producers (IPPs) are now categorized as contingent liabilities, adding about 200 billion rand ($13 billion)to government’s guarantee exposure from 2015/16, National Treasury said on Wednesday.

The government issues guarantees, which will amount to 467 billion rand at 31 March 2016, to several state-owned companies, with Eskom accounting for 74 percent of the total guarantee portfolio.

The portion of the guarantees that firms borrow against, known as the exposure amount, is a contingent liability and creditors can call on government to pay the debt should any default occur.

“The probability of default is low, since the regulator generally approves tariff increases that accommodate these agreements. However, significant deterioration in Eskom’s financial position may increase government’s risk exposure,” the Treasury said.

Exposure amounts are projected to increase to 258 billion rand at the end of March, from 226 billion rand in 2014/15, with Eskom accounting for most of the increase.

Africa’s most advanced but struggling economy is diversifying its energy mix away from an over-reliance on coal-power plants to include greener wind and solar projects.

A successful independent power producers program, started in 2010, is expected to provide 7,000 megawatts of energy with 47 projects fully operational by mid-2016, up from the 6,377 MW procured at the end of December.

Treasury reiterated on Wednesday that government’s plan for 9,600 MW of new nuclear power would continue “at a scale and pace that is affordable.”

Additional funding of 200 million rand was available in 2016/17 for transactional advisers and consultants on the nuclear programme.

Energy investment amounts to 70 billion rand this year and will be over 180 billion rand over the next three years as construction on Eskom’s Medupi, Kusile and Ingula power stations is completed, said Finance Minister Pravin Gordhan.

($1 = 15.3266 rand)


(Reporting by Wendell Roelf; Editing by Tiisetso Motsoeneng)

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Eskom names short-term suppliers for Arnot coal-fired plant

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s Eskom will use coal from Glencore, South32 and five other suppliers to power the Arnot power station, including Exxaro Resources with whom it did not renew a 40-year contract in December, the utility’s spokesman said in a Twitter post on Tuesday.

The short-term supply agreements are separate from the list of bidders for the new long-term contract, the outcome of which Eskom said it will announce before the end of the first quarter of this year.

Eskom listed lesser-known Tegeta, Keaton Energy, Hlagisa Mining and Umsimbithi Mining as the other short-term suppliers to the 2,100 MW Arnot plant.


(Reporting by TJ Strydom; editing by Jason Neely)

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