Rand falls due to load-shedding

South Africa has been hit by a sixth straight day of rolling blackouts as state-owned power utility Eskom Holdings SOC Ltd. acts to prevent a total collapse of the grid after a raft of plant breakdowns.

The company implemented a record level of cuts — 6,000 megawatts — late Monday, prompting platinum and gold mines in the country to halt operations.

Highlights So Far:

  • Eskom says there’s a high likelihood of cuts all week. The utility plans to cut 4,000 megawatts — known as Stage 4 — until late Tuesday.
  • Producers including Sibanye, Implats and Harmony stopped mining operations and mobile-phone networks have been affected.
  • The City of Cape Town warned that a return to Stage 6 could lead to water-supply interruptions.
  • Rains that have soaked coal and caused flooding may continue through Friday.

Here are the developments, updated throughout Tuesday 10 September. Time stamps are local time in Johannesburg.

Rand falls (2:47 p.m.)

The rand fell 1% to 14.8158 per dollar by 2:47 p.m. in Johannesburg. It was the outlier in emerging-markets, which traded largely flat versus the dollar. The South African currency has now weakened two days in a row after Eskom raised the blackouts to a record level Monday. The rand declined Tuesday by the most on a closing basis since Oct. 30.

Perfect storm for insurers (2 p.m.)

Between the power cuts and heavy rains causing flooding in parts of South Africa, it’s a “perfect storm” for insurance companies at the moment, said Christelle Colman, a spokeswoman for Old Mutual Ltd.’s property and casualty insurance unit.

The business typically expects higher levels of claims during periods of extended load-shedding, she said. These vary from claims related to frozen foods spoiling in freezers when outages exceed the scheduled time period to power surges damaging electronics around the home.

There’s also an increase in claims due to power surges and motor car accidents during night-time blackouts. The rotating power cuts also mean more incidents of theft and robbery, especially during December when South Africans travel for summer holidays.

Battery Theft (1:30 p.m.)

The constant outages are affecting the performance of batteries powering MTN Group Ltd.’s equipment, said Africa’s largest wireless carrier. The company spent about R300 million last year ($20 million) on batteries for existing sites and has 1,800 generators in use.

The company is also having to spend more on security to protect its batteries, generators and general site equipment from thieves and vandals.

“Load-shedding is seeing entire neighborhoods cloaked in darkness at predictable times, which is offering criminals greater cover for their thieving,” the company said.

Limited impact at Gold Fields (1:15 p.m.)

Gold Fields Ltd., which operates one mine in South Africa, said the impact of power cuts has been limited so far.

“We have managed the impact so far by shifting load between critical activities to ensure our core mining activities can continue,” said spokesman Sven Lunsche. “If load shedding continues at Stage 4 or above for a prolonged period, however, and there are sustained interruptions linked to our production ramp up it will become more challenging and we will need to implement alternative mitigations to ensure business continuity.”

Manufacturing contracts (1 p.m.)

South Africa’s statistics office said factory production contracted for the fifth consecutive month in October, when Eskom implemented the previous round of power cuts. That adds to the risk of a second recession in as many years. Manufacturing accounts for about 13% of gross domestic product.

Anglo Platinum costs (1 p.m.)

Anglo American Platinum Ltd. said that the rolling blackouts may add to its production costs this year, which are already likely to exceed an earlier forecast.

The company is engaging with Eskom to understand the technical constraints and see where it can assist, spokeswoman Jana Marais said separately.

“We have standby diesel power generators in place, and all our operations have emergency-response plans which detail what should happen in the event of load-shedding, which includes the safe evacuation of employees, shutdown procedures and communications.”

Vodacom connectivity (12:30 p.m.)

Vodacom Group Ltd. said its customers around the country will be experiencing network-connectivity issues due to the Stage 4 load-shedding affecting its mobile phone towers.

“Our towers do use batteries as a back-up but these do have limited power and will eventually fail,” said spokesman Byron Kennedy. “A notable complication with Stage 4 load shedding over consecutive days is that batteries don’t get enough time to recharge to full capacity.”

Vodacom has recently put mitigation measures in place including additional batteries and generators around the country, he said.

Cape Town water (12 p.m.)

A return to Stage 6 could lead to water-supply interruptions in Cape Town, the city warned.

“Load-shedding of this severity is likely to constrain our ability to provide water supply in the reticulation system across the whole of Cape Town in the usual way,” it said in a statement. “Residents should not panic, but please use water sparingly and prepare just in case they do experience a period of no water supply.”

Platinum, palladium rise (10:30 a.m.)

Platinum and palladium led gains among major precious metals after South African producers said they had stopped operations. Platinum gained as much as 1.2%. Palladium rose as much as 0.6% to a fresh record of $1,894.47 an ounce, closing in on $1,900 for the first time. The metal has rallied 50% this year amid tight supply.

High likelihood of cuts all week (10 a.m.)

Eskom plans to cut 4,000 megawatts until 11 p.m. on Tuesday as it continues to face a shortage of generating capacity. Breakdowns are at 15,200 megawatts, the company said in a statement.

“The incessant rains continue to impact coal handling and operations at our power stations. The probability for load-shedding remains high for the rest of the week.”

Rains to continue (10 a.m.)

Heavy rains have soaked coal, which is used as fuel, and caused flooding at Eskom’s Kriel and Camden power stations, the utility said. South African Weather Service forecasts show rain in Mpumalanga, the province in which the electricity plants are located, will continue through Friday. Rainfall in Lephalale, near the giant Medupi plant, could reach as much as 25 mm (1 inch) today, forecasts show.

Mines close (Earlier)

Producers including Sibanye Gold Ltd., the world’s biggest platinum miner, recalled workers from underground and stopped milling ore after Eskom announced Stage 6 cuts on Monday night. No. 2 producer Impala Platinum Holdings Ltd. didn’t start the 4 a.m. underground shift Tuesday and the company has stopped milling ore and shut its smelter.

Now read: Permanent load-shedding for a year is needed – Expert

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Rand falls due to load-shedding