Eskom to be downgraded?

Credit and economic risk collide when it comes to debt issued by Eskom. The damage is exacerbated by serious operational and medium-term management issues. Ensuring reliable supplies of raw materials should be a top priortity, but hasn’t been. Moody’s is considering a multi-notch downgrade of Eskom’s foreign and local currency issues. Eskom’s debt is not […]

Confidence and capital – Nationwide has neither

Nationwide Airlines is on the ground. A series of business and operational problems met the global economy of skyrocketing avgas prices and left them insolvent by R172m (assets of R46m less liabilities of R218m). They’ve also left friends of mine stranded in South Africa after a trip from Ireland for another friend’s wedding (congratulations Kay and […]

Repo rate raised 50bps to 11.5%

The South African Reserve Bank increased the Repurchase Rate today by 50 basis points. As usual, all the talking heads are out explaining why this was exactly the right thing, exactly the wrong thing, exactly the right thing for the wrong reason and several other combinations. Historical levels of Repo updated graphs – Short memory […]

Optimism and flawed decision making

Behavioural finance is no longer a “new idea”. It has entered mainstream finance education through CFA, Business Schools, even actuarial exams (ST5 for UK and South African actuaries). Some of the biggest lessons revolve around how bad we as a species are at making decisions in the face of uncertainty. Emotional biases, overconfidence, loss aversion, […]

Sharing the light

Florida is experiencing its very own fun and games with nuclear power station shutdown, blackouts and unhappy Dwarves and Princesses.  Ok, so apparently the Dwarves and Princesses were mostly unaffected. Without wishing the hardship on  the Floridians, I’m pleased to hear the news in that it shows that systemic risk in electricity grids is a global operational risk and not […]

Zim hyperinflation not so special

Official inflation in Zimbabwe now stands at over 100,000%.  Jokes around Zim’s official stats aside, this isn’t even real hyperinflation by historical standards. Germany, in 1922, in the aftermath of Word War I and the Treaty of Versailles experienced inflation of over 200 billion percent. Goes to show how short our memories are (as a […]

National consequences of not understanding uncertainty

Business Report has an interesting article where Eskom recommends shelving new infrastructure projects due to lack of electricity until at least 2013. A few important quotes form the piece: Bongani Nqwababa, Eskom’s finance director, said yesterday that the parastatal had advised the government that it wanted South Africa marketed only from 2013 for both local […]

It’s not just us – the cost of (electric) power

South Africans have been lamenting the state of our power infrastructure and Eskom’s inability to keep infrastructure up with demand.  Now there’s plenty of useful debate left there (so many of the points I hear made are irrelevant and serve to distract everyone from the real issues. Past sins For example, why are so few […]