Lengthy load shedding could finally 'junk' South Africa

[Jopie Fourie]

Eskom, which provides about 95% of the nation’s electricity, implemented power cuts on Wednesday amid maintenance problems. The rand weakened as investors fretted about the effect on economic growth.

Power shortages have been a major constraint on output in Africa’s most industrialized economy. Protracted outages could cost the country its last investment-grade credit rating from Moody’s Investors Service, which is due to deliver its next assessment on November 1. The government has said it will announce plans to restructure Eskom into three operating units and reorganize its debt by the end of the month.

“The timing isn’t great,” said Simon Harvey, a London-based currency analyst at Monex Europe Ltd. “Whether this is a short-term reaction from Eskom to stem longer-term supply issues or is the start of a continuous process is key and will determine if the rand’s sell-off is more structural. Regardless, investors won’t take the news well.”

Lengthy load shedding could finally 'junk' South Africa | Fin24

Moody’s Investors Service is due to deliver its next assessment on November 1.

www.fin24.com

 

[Binary_Bark]

Yers but we are getting mre mony in ours pockets

 

[Jopie Fourie]

Two notes...

1. South Africa is already junk, as confirmed in 2017 by the world's two leading credit ratings agencies. No getting around that.

2. Moody's will not downgrade SA to junk if bribes were paid to them, no matter the condition the country finds itself in.

 

[Jet-Fighter7700]

it had to happen,

ANC got reelected despite the warnings from literally everybody.

 

[Jopie Fourie]

it had to happen,

ANC got reelected despite the warnings from literally everybody.

What I find even more strange than this, is before every Moody's decision is about to be announced, the ANC suddenly comes up with some 'plan' to save the economy, the latest being Tito's plan. For some funny reason Moody's is the only ratings agency falling for these plans, time and again, and always "wants to give the ANC some time to implement it". Time after time none of these plans are implemented, they fail, yet Moodys are telling the world South Africa is a great investment.... money talks, it seems. The only logical explanation.

 

[3WA]

Two notes...

1. South Africa is already junk, as confirmed in 2017 by the world's two leading credit ratings agencies. No getting around that.

Nice one. You junked Moody's before they can junk you.

 

[Jopie Fourie]

Nice one. You junked Moody's before they can junk you.

Weeelllllll....... they are not really the top of the cream now, are they?

Imagine how much money investors were saved by not investing in SA if they heeded the calls of the top 2. Imagine the losses suffered by those who followed Moody's.

 

[Hamster]

If I was a conspiracy theorist:

1. Implement loadshedding and ensure the inevitable downgrade
2. Stop the brain drain because those that still wanted to leave's money is now worthless

 

[Jet-Fighter7700]

What I find even more strange than this, is before every Moody's decision is about to be announced, the ANC suddenly comes up with some 'plan' to save the economy, the latest being Tito's plan. For some funny reason Moody's is the only ratings agency falling for these plans, time and again, and always "wants to give the ANC some time to implement it". Time after time none of these plans are implemented, they fail, yet Moodys are telling the world South Africa is a great investment.... money talks, it seems. The only logical explanation.

my tin foil hat is itching quite a bit,
who knows what backroom deals are being made, and why they came up short for S&P and others

 

[FrankCastle]

How many more "could finally junk SA" articles are there going to be?

 

[Flanders]

Like hitting one's head against a brick wall....over and over and over again...

 

[konfab]

 

[Gaz{M}]

A downgrade to junk would be a storm in a teacup. Yes, short term some bond indexes might sell off some bonds etc. but within a few weeks everything would be back to normal. Except any new government bonds would attract higher interest rates, like 10% instead of 9%+ currently. Ultimately, the ANC couldn't give a vok, because they will just add the burden onto tax payers. They are already borrowing all over the place to bail out SOE's and this won't change or stop if we are downgraded. It will just cost a bit more.

 

[Jopie Fourie]

A downgrade to junk would be a storm in a teacup. Yes, short term some bond indexes might sell off some bonds etc. but within a few weeks everything would be back to normal. Except any new government bonds would attract higher interest rates, like 10% instead of 9%+ currently. Ultimately, the ANC couldn't give a vok, because they will just add the burden onto tax payers. They are already borrowing all over the place to bail out SOE's and this won't change or stop if we are downgraded. It will just cost a bit more.

I do agree with you that this would be a storm in a teacup. The damage has already been done 2 years ago when the behemoths downgraded us to junk status. The capital outflows the past 2 years is evident of that.

However, the real effects of Moody's downgrade will definitely become a reality for the government in 1 year from now. The problem they face, with a downgrade from all 3 agencies, they will no longer get any debt from anywhere across the globe. In addition, the little investors and portfolios who still invest in SA will also be pulling out and take them funds elsewhere to comply to their own laws.

I suspect in the short term, the ANC will face a large number of challenges in paying grants, among things.

 

[Gaz{M}]

I do agree with you that this would be a storm in a teacup. The damage has already been done 2 years ago when the behemoths downgraded us to junk status. The capital outflows the past 2 years is evident of that.

However, the real effects of Moody's downgrade will definitely become a reality for the government in 1 year from now. The problem they face, with a downgrade from all 3 agencies, they will no longer get any debt from anywhere across the globe. In addition, the little investors and portfolios who still invest in SA will also be pulling out and take them funds elsewhere to comply to their own laws.

I suspect in the short term, the ANC will face a large number of challenges in paying grants, among things.

It will still be possible to get debt/bonds globally. But certain lenders would not be able to lend. But trust me, if the interest rates are attractive, there will be plenty of money to borrow. We tax payers will just have to pay back at higher interest rates.

 

[TheMightyQuinn]

You know what's even MORE irritating than load shedding?

All these fukked up threads that will start up again:

"Where can I buy an inverter?"
"How does batteries keep my house going?"
"Can I keep my WiFi on with these 2 torch batteries?"

Ad nauseam....

Case in point:

Load shedding is back. Do you have solar, batteries or a generator?

Build in Braai. :) Gas Plate. 5.5 KVA Generator on a switch over. Solar vacuum tube Geyser.

mybroadband.co.za

 

[Jopie Fourie]

It will still be possible to get debt/bonds globally. But certain lenders would not be able to lend. But trust me, if the interest rates are attractive, there will be plenty of money to borrow. We tax payers will just have to pay back at higher interest rates.

My question is, how sustainable will this be? With so many tax payers leaving the country and decline in tax revenue, also considering capital fleeing, no more new investments and in addition, a collapsing economy, how much money get they get their hands on, and for how long to ensure that only grants are being paid each month?

 

[Polymathic]

The rating agencies are trying everything they possibly can to not give SA a junk ratings but Eskom is doing everything possible to get us a junk rating. I think Eskom will win this battle

 

[infoseeker]

If I was a conspiracy theorist:

1. Implement loadshedding and ensure the inevitable downgrade
2. Stop the brain drain because those that still wanted to leave's money is now worthless

3. Close Durban harbour.

 

[rambo919]

4. Blame the "third force" and apartheid.