Flash Briefing: Joburg, Cape Town break Eskom chains; World Bank warns on SA debt; DA Tshwane victory

By Jackie Cameron

  • South Africa’s biggest cities are preparing to source their own power after the energy ministry approved letting them wean themselves off state utility Eskom. The country has subjected cities to outages for the past 13 years. Johannesburg and Cape Town, which have a combined population of about 10 million people, plan to diversify away from the electricity produced mainly from coal by Eskom. In addition to improving security of supply, the move will allow the cities to boost their fight against climate change by using power that doesn’t result in the emission of greenhouse gases. But, it will slash revenue for Eskom, which is struggling to service a $30bn debt bill. For more on that, do see the story in the Good Hope section on BizNews.com.
  • The World Bank has told South Africa’s government it has to cut its wage bill to qualify for a loan of as much as $2bn and doesn’t want the money used to bail out insolvent state companies, a person familiar with the situation said. Those conditions have stalled negotiations on the loan that began in April, says Bloomberg. South Africa this year has turned to multilateral lenders for the first time since the end of apartheid, overcoming political opposition from within the ruling party, as it tries to kick-start an economy forecast to contract the most in nine decades. Finance Minister Tito Mboweni is expected to outline plans to fund a revival in output when he presents the medium-term budget on Wednesday.
  • South Africa’s main opposition party won a court case on Tuesday that clears the way for it to retake control of the Tshwane municipality, which includes the capital, Pretoria. The Supreme Court of Appeal upheld a High Court judgment that nullified a March decision by the provincial government, which is led by the ruling African National Congress, to place the municipality under administration to fill a leadership vacuum that ensued after a protracted power struggle. No party holds a clear majority in Tshwane. The Democratic Alliance wrested control of the municipality from the ANC by entering into a loose alliance with the Economic Freedom Fighters after a 2016 local government vote, but their cooperation accord subsequently unraveled.
  • Any chance that investors will soon be tempted to buy the battered stocks of South Africa’s locally focused companies will be tested Wednesday when Finance Minister Tito Mboweni presents his medium-term budget. Investors will need evidence of real and achievable reforms before they will bet on the plan set out by President Cyril Ramaphosa to revive an economy in its longest recession such 1992, according to Stanlib, a Johannesburg-based money manager that oversees more than R600bn ($37bn). They will be looking to Mboweni for detail on how the government will tackle its ballooning public-sector wage bill and how it will fund debt-crippled state-owned companies, otherwise “South Africa Inc.” stocks may continue to be shunned, despite enticing valuations.
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