South Africa's rand regains ground; Eskom bonds fall

JOHANNESBURG: South Africa's rand bounced back from a four-week low against the dollar on Monday, but pessimism around Eskom remained as the struggling power group failed to dispel investor worries with the appointment of an interim chief executive.

Dollar-denominated bonds issued by the cash-strapped state-owned utility extended falls following an announcement by the government that chairman Jabu Mabuza will act as chief executive officer until a new CEO is found.

Rating agencies Fitch and Moody's last week both warned about fiscal pressure on South Africa and highlighted Eskom as a major risk, piling pressure on the currency.

Monday's announcement means Eskom is still seeking a permanent replacement for Phakamani Hadebe, who in May said he would step down as CEO after the "unimaginable demands" of the job affected his health.

Eskom's 2025 bond issue fell to its lowest level in one month, data from Tradeweb showed on Monday.

At 1637 GMT, the rand was up 0.7% on the day at 14.2050 per dollar.

DISCOVERY RECOVERS

Statistics South Africa will release second-quarter unemployment figures on Tuesday, and the revenue service will publish June trade balance numbers on Wednesday.

"Focus will now turn back to the US Federal Reserve's interest rate announcement due on Wednesday, while the release of local employment figures and trade balance data this week may further add to the rand's volatility," Bianca Botes, a Treasury partner at Peregrine Treasury Solutions, said in a note.

In fixed income, the yield on the benchmark government bond due in 2026 dipped to 8.315%.

Stocks closed stronger with the All-share index up 0.81% to 58,035 points, while the Top-40 index gained 0.88% to 51,977 points.

Leading the Blue-Chip was insurer Discovery which rose 3.24% to 133.70 rand, while South Africa's biggest insurer Sanlam climbed 3.70% to 75.32 rand, each rebounding from falls last week.

" has recovered. What I think affected Discovery and insurers last week was commentary around the National Health Insurance (NHI) bill, and that had a big part to play in why it was so negative," said Ryan Woods, a portfolio manager at Independent Securities.

The government NHI bill, which seeks to centralise healthcare financing, will minimise the role of private healthcare.

Mobile operator MTN also rose 3% to 109.98 rand after its Nigerian subsidiary was granted a full super agent licence, allowing the firm to convert its existing airtime agents and recruit other small businesses to distribute financial services there.

"The market is reacting to something positive in that space," Woods said.