JOHANNESBURG (Reuters) -South Africa’s rand weakened on Friday after President Cyril Ramaphosa’s declaration of a “state of disaster” to tackle crippling power shortages in the country failed to elicit investor confidence.
Analysts said the president’s response to the crisis did not impress them, with no clear end in sight to the hours of daily power cuts that have hurt businesses across all sectors and hammered economic growth.
At 1530 GMT, the rand traded at 17.9225 to the dollar, 0.82% weaker than its previous close.
“It has been clear for some time that the root cause behind the failures of… Eskom… is corruption and crime. It seems impossible to… end load-shedding (power cuts) without rooting out all forms of criminal activity entrenched and surrounding Eskom’s operations,” economists at Nedbank said.
Ramaphosa said the country would use disaster legislation, which it invoked during the COVID-19 pandemic, to help end power cuts, although it was not clear exactly what this would entail.
Declaring a national state of disaster gives the government additional powers to respond to a crisis, including by permitting emergency procurement procedures with fewer bureaucratic delays and less oversight.
Ramaphosa also said he would appoint a minister of electricity within the presidency, and that the government would increase existing social grants to cushion the poor against rising inflation.
Shares on the Johannesburg Stock Exchange fell, with investors sceptical of the government’s plans to deal with regular power cuts. The broader all-share index closed down 1.29% and the top-40 index ended 1.38% lower.
The government’s benchmark 2030 bond was weaker, with the yield up 10.5 basis points at 9.865%.
(Reporting by Nellie Peyton, Nqobile Dludla and Bhargav Acharya; Editing by Nivedita Bhattacharjee, Kirsten Donovan)
