Market Commentary | The week that was
COP27 €600 million loan while coal power is here to stay: While world leaders are discussing action to tackle climate change at the COP27 Climate Summit in Egypt, South-Africa has received a €600 million loan from Germany and France to support the country's move away from its dependence on coal.
There seems to be a misconception that South Africa is suddenly abandoning coal-fired power at the whim of wealthy nations. However, this is more likely the result of poor communication between the government and its financing partners. Only seven of Eskom's 15 coal-fired power facilities will be shut down by the end of 2030 and two more by 2035, according to South Africa's Just Energy Transition Plan (JETP). By 2050 only the two newest coal plants, Medupi and Kusile, as well as one unit of the Majuba plant, will still be in service, "as currently envisaged". The reality is that South Africa will still be using coal power for a number of decades while wealthy nations will already have completed their phase-outs and billion-dollar energy transition deals.
Warning regarding public infrastructure: Nearly half of South Africa's public infrastructure has collapsed or is on the verge of collapsing, according to the South African Institution of Civil Engineering (SAICE). SAICE President, Prof Marianne Vanderschuren, has recently warned that this situation must be rectified right away. Although a vast amount of capital was invested in upgrading South Africa’s infrastructure prior to the country hosting the 2010 Fifa World Cup, "the trend has been downwards ever since”. She reiterated that if action is not taken immediately, South Africa risks becoming a failed state.
Markets: On Friday, the Top-40 climbed by 3.69% while the All-Share index rose by 4.59%. Both the Industrial 25 and the Resource 10 indices strengthened: increasing by 4.95% and 4.05% respectively. The South African rand climbed in early trade on Friday (11 November), continuing its trend of previous gains in anticipation that the Federal Reserve may soon start to scale back on its significant interest rate increases in the wake of lower-than-expected US inflation data.
Looking at the week ahead: On Tuesday, China will publish its October data on retail sales, industrial production, investment, and employment. Economists anticipate that the data will reflect the effects of the government's zero-COVID policy. On Wednesday key US retail sales figures will be released; and on Thursday the UK’s new Chancellor, Jeremy Hunt, is expected to announce the British government's new fiscal plan.