South Africa enters a new week battered on the economic front. The rand has weakened significantly since the country confirmed its first coronavirus diagnosis and two other subsequent cases over the weekend, reaching a low of R15.67 on Sunday.
Early on Monday morning the local unit plummeted to it lowest level in five years, after Asian stock markets plunged, AFP reported. In a market update Bianca Botes, treasury partner at Peregrine Treasury Solutions, noted that markets are in panic, not only because of coronavirus but also because of an oil price war between Russia and Saudi Arabia. India has also confirmed a bird flu outbreak in Kerala.
The week ahead will see some key statistics released, including Business Confidence Index score for the first quarter of 2020 on Wednesday. There are indications that the market isn't pinning its hopes high on this one. NKC Economics expects business confidence to have deteriorated this past quarter.
Bloomberg Economics expects the index to show further deterioration in the economy in the first three months of the year. The FNB Economics team pointed out that the index score has remained below the 50, which is the neutral point for five consecutive years now and expects the first quarter reading to be "even more depressed" because of intermittent power supply.
Eskom has warned of an increased likelihood of power cuts over the next 18 months as it conducts maintenance on its fleet of ageing power plants.
On Thursday, Statistics SA will publish mining and manufacturing data for January 2020, numbers that will paint a picture on whether these sectors demonstrated any resilience in the face of continued power cuts or if South Africa’s economic has been worse than anticipated.
The economists are not optimistic on that front either as the combination of interruptions from load shedding and the spread of the coronavirus which is affecting China's demand for commodities persist. NKC Economics forecasts mining output for January to have risen 1.2% year-on-year. Manufacturing data for January is also expected to reflect a contraction in production by 6.4% year-on-year.
On the companies' front, FirstRand, Sanlam, former Old Mutual UK business, Quilter will publish their financial statements. Sanlam has already indicated that it expects its headline earnings to fall by up to 25% and the fall in earnings per share to be as much as 45%. Pepkor which is looking to raise funds in the bond market will hold its AGM on Wednesday.
Compiled by Londiwe Buthelezi