Rand swings to gains as investors assess Eskom’s full-year loss

Eskom is reporting a full-year loss of R20.7bn.
The government is now pledging a R128bn bailout over the next three fiscal years to keep Eskom operating. Picture: Dean Hutton, Bloomberg

South Africa’s rand swung to gains and benchmark government bonds narrowed declines after Eskom reported a full-year loss of R20.7 billion ($1.5 billion).

Read: Eskom’s R20.7bn blowout strains SA’s finances

The rand advanced 0.1% to 14.15 per dollar, after being as much as 0.5% weaker earlier, while yields on 2026 government notes traded at 8.32%. Yields on Eskom’s dollar bonds due February 2025 fell three basis points to 6.26%.

Read: Foreigners sell rand assets at record pace as Eskom woes mount

The power company supplies about 95% of South Africa’s electricity and relies on government handouts to remain solvent. The utility’s precarious financial state has now become a national problem, with the government pledging a R128 billion bailout over the next three fiscal years to keep it operating.

Additional support for Eskom would likely come at the price of the country’s last remaining investment-grade rating with Moody’s Investors Service as it would widen the fiscal deficit and increase the debt burden.

© 2019 Bloomberg L.P.

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It’s hard to know what to think when bad news is seen as good news ……interesting times as always in South Africa. We might have our troubles but it’s never boring here!

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