South Africa Receives R10 billion loan from Europe to repair energy sector

The second quarter of the year was one of economic decline for South Africa as the country was experiencing a number of economic issues however the effect of these issues was exasperated by the constant electricity cuts which the country was and still is subject to. As we are now in summer energy requirements are no longer as intensive but thanks to the recent visit of President Ramaphosa the country has been able to secure R10 billion rands in funding to aid the country to restore its energy facilities. What does this mean for the RAND and how will this reflect on the USDZAR？

If you look at the USDZAR over the yeah you would see that the ZAR has been steadily losing value as the economy has been struggling. One of the leading causes of this economic decline is electricity cuts. There are a bunch of economy-dependent, energy-intensive industries which slowed down production due to the cuts hence the slowdown in economic performance

At the COP27 conference in Sharm Egypt, South Africa was able to secure a €600 million loan from France and Germany. These funds are to be used to make the transition from coal energy to Wind and Solar power much easier and more effective.

This is good news as the country has been experiencing an energy crisis which was at unprecedented levels. There are some who experience daily power cuts till today and so the fresh investment in a new energy sector is welcomed. It also means that new jobs are going to be created to build and maintain these plants meaning a stronger economy

What doe this mean for the ZAR？

If you are looking to trade the ZAR then it is best you get a broker with the smallest spreads as brokers always use the fact that the ZAR is an exotic currency to crank up the spreads. But there are brokers out there with reasonable spreads, you only have to look using the WikiFx app. This gives you a live feed of the spreads that brokers offer for specific pairs. You will be able to compare brokers and sign up for a new account without leaving the app. So if you need to find a good broker download the WiKiFx app today.

This is good news for the ZAR as losing value for almost six months straight. We can even see that the USDZAR pair is reacting well to the news as we recently broke below the swing low of the R17.90 level and chances are we will not be trading back at that level. The new loan is not the only good news giving the ZAR its strength. The recent Budget report by the finance minister added confidence to the market as well as the recent strikes on the exporting business Transnet.