Several months ago, we wrote about Dynasty’s concerns surrounding Eskom, referring to it as the “the elephant in the room.” These views have come further to fruition as Eskom’s gargantuan weight on South Africa’s fiscal health is all the more evident. This week Moody’s issued a warning that additional bailouts to support Eskom are “credit negative”.
Global News
- Boris Johnson has become Prime Minister of the UK. He has promised to, amongst other things, deliver Brexit by the end of October this year. Regardless of what you may think of him, it will be an interesting ride.
- Robert Mueller delivered his anticipated testimony to Congress this week. Restrained as ever, Mueller confirmed that: Russia meddled and continues to meddle in US politics; and President Trump, while not charged, could face indictment once he leaves the White House. For a summary of what Mueller said in his testimony, follow this link.
- Major global markets were up slightly this week, with the S&P gaining 0.9% and the MSCI 0.5%, both to Thursday’s close. Friday’s markets are currently also in the green.
Local News
- Moody’s rating agency, the only major rating company that still holds South Africa at investment grade, released a statement on Thursday saying that the additional R59bn in support to Eskom is credit negative for South Africa “because it would be an additional drain on fiscal resources.”
- The rand reacted on the news breaking above R14 to the US dollar to close 1.5% weaker. The rand has further weakened on Friday to be at R14.25/$ at the time of writing.
- Next week, Eskom is due to record an R25 billion financial loss. This is higher than any single public or private company ever reported in South Africa. The loss is mostly attributable to higher labour costs, follow this link for an article from Sikonathi Mantshantsha.
- To say that the public protector’s reputation was held to question this week would be an understatement. The Constitutional Court upheld the High Court’s ruling in the Absa-Bankorp matter. The Majority ruling said that “the public protector’s entire model of investigation was flawed and that she was not honest about her engagements during the investigation.” In so doing, they upheld the cost order award of the High Court that requires her to personally pay back 15% of the South African Reserve Bank’s legal costs.
- ANC Secretary-General, Ace Magashule, has been implicated in the #GuptaLeaks scandal. The Daily Mavericks investigation links new dots in one of South Africa’s most sordid corruption sagas, follow this link for more.
- The ALSI was under pressure this week, falling 1.1% at the time of writing, despite the rand losing 2.3% to R14.25/$ on the back of the Moody’s warning.
Source: Dynasty, Daily Maverick, Moneyweb, Reuters, RMB, Aljazeera, and Bloomberg Markets, etc
