Rumours of tariff increases from the National Energy Regulator aren’t going down well with consumers, especially as they’re still waiting for former Eskom CEO Brian Molefe to pay back the R30 million he owes to the Eskom Pension and Provident Fund. Eskom is owed billions by municipalities and is struggling to recover debt from communities, too – in fact, it’s resorted to pulling the plug on non-paying households and those that have rigged up illegal connections.

The Congress of South African Trade Unions (COSATU) has come up with a hare-brained scheme to use R200 billion of workers’ pension fund monies to fix Eskom – something that has horrified the Public Servants Association of South Africa (PSA). As desperation grows regarding Eskom, the latest patient on life support, South Africa’s enforced candlelit vigil continues. Just keeping the lights on has become a more pressing issue than economic growth this year, which should worry everyone.  

It’s not just South Africa’s largest state-owned enterprise that’s in “deep, deep trouble”, to quote Bart Simpson of The Simpsons fame. South African Airways (SAA), which is under business rescue, recently announced it will cancel 48 local and international flights in February in order to cut costs. 

The Development Bank of Southern Africa has undertaken to loan R3.5 billion to SAA, but this isn’t the best proposal, because development projects would be sorely neglected – and the amount would be a drop in the ocean, as the struggling airline owes more than R20 billion. There’s also no guarantee that SAA would be able to repay the debt – but we’re getting rather good at throwing good money after bad in South Africa. Of further concern is the allegation that SAA may consider dipping into Unemployment Insurance Funds to pay retrenchment packages to its staff when these should be paid by SAA itself. 

While it’s good news that President Cyril Ramaphosa has asked the Special Investigations Unit to look into tender fraud and corruption in Eskom and SAA, we shouldn’t hold our collective breath to see the guilty parties brought to book. Nor should we wait for the misappropriated funds to be recovered any time soon.

South Africa has seldom been in a darker place – well, not since the 1980s – and there’s the inevitable junk status and tepid GDP growth to look forward to this year (the International Monetary Fund expects 0.8% growth in 2020 at most). The rand has taken a beating on the back of concerns about Eskom, and local stocks fared worse than their emerging-market peers as jitters about the spread of the 2019-nCoV coronavirus in China affected the markets.

For risk-averse investors, inflation-beating hard currency investments are one of the options available to mitigate the risk in this unstable environment. With Brexit a done deal and the pound generally holding steady, this might be one of the offshore rand hedges to consider. 

For more information on this and more, the team at Mercury FX International are trusted specialists.  They offer free-to-have multicurrency accounts capable of holding many currencies indefinitely as well as better-than-bank exchange rates. They will also assist with applications for tax clearance should you need to send out more funds than your allotted annual SDA of R1 million. DM

For more information get in touch with the Mercury team here