Long stories short
- The pound fell to a record low against the dollar as the UKâ€™s new chancellor hinted at more tax cuts to come (more below).
- Giorgia Meloni was poised to become Italyâ€™s first woman prime minister and the countryâ€™s most right-wing leader since Mussolini (more tomorrow).
- The White House said it had warned Putin privately of â€ścatastrophicâ€ť consequences and direct US intervention if he used nuclear weapons in Ukraine.
Off in Africa
South Africa canâ€™t keep the lights on. The causes arenâ€™t the same as those of Europeâ€™s energy crisis, but the effects should be a lesson. Rolling blackouts are shaking the foundations of the liberation movement founded by Nelson Mandela.
President Cyril Ramaphosa should have been schmoozing other leaders in New York last week but had to fly home to deal with the power cuts. Why?
- He faces elections next spring.
- â€śLoad-sheddingâ€ť â€“ a euphemism for blackouts â€“ has become a lightning rod for resentment against the African National Congress (ANC), which has ruled since the end of apartheid.
- Last week blackouts hit the sixth of eight escalating stages, for only the third time ever.Â
Homes, shops and businesses are in the dark for at least six hours each day. Shopkeepers cannot keep their tills running, phone companies warn services may fail and the countryâ€™s mining giants are scaling back operations. So far this year South Africa has had 108 days of outages.
The problem isnâ€™t energy supply. South Africa has enough coal to last 200 years and its national energy company, Eskom, isnâ€™t afraid to use it regardless of net zero targets.Â
The problem is neglect, debt, corruption and mismanagement in the nationâ€™s ageing 15-strong fleet of coal-fired power stations. Replacements and refurbishments have been delayed, forcing power plants to breaking point. Rolling blackouts are then imposed to protect the grid.
In 2001 Eskom was ranked the worldâ€™s best power company by the FT. Its decline since then, for many South Africans, is emblematic of the wider failed promises of the ANC. Other state enterprises and public services have also been looted and faltered. The economy is not in great shape and power cuts are making things worse:
- Not working: One-in-three are unemployed
- Shrinking: South Africaâ€™s gross domestic product fell by 0.7 per cent in the second quarter
- Voting with their feet: A recent poll estimated half the countryâ€™s graduates and top earners were thinking of emigrating
How badly might this damage the ANC? The party of Mandela was once deemed unassailable, but a general disenchantment driven by stubbornly high poverty and unemployment levels and corruption under Ramaphosaâ€™s predecessor, Jacob Zuma, has eroded the partyâ€™s vote share for a decade.Â
Sensing political peril, Ramaphosa has vowed to â€śremain seized with this [load-shedding] issue until the situation is resolvedâ€ť. Two months ago he laid out a plan for more energy investment, faster repairs and the purchase of power from other suppliers. Such schemes have failed to deliver before though, and time is tight.
In December the ANC holds its elective conference, at which young guns and the old guard will jockey for top party positions and Ramaphosa will seek backing for a second term. Heâ€™ll face voters in next Mayâ€™s general election, when if recent local elections are any guide the party could fail for the first time to achieve 50 per cent of the national vote. If the grid is still on the blink by then, it will make his task harder.
Load-shedding has dominated South Africaâ€™s headlines for weeks. The opposition scents blood, yet is ideologically divided between the centrist Democratic Alliance and the Marxist Economic Freedom Fighters, stuck on around a fifth and a tenth of the vote share respectively in last yearâ€™s municipal elections.Â Â
Turning the lights out on the ANC era was never going to be straightforward.
Labour should be the patriotic party
Starmer was right to open the Liverpool conference with the national anthem. Now he should make climate change a matter of national security.
CAPITALÂ ECONOMY, BUSINESS AND FINANCE
Pound near parityÂ
At its post-crash peak in 2014 a pound would buy $1.70. This morning at an ATM at Stansted airport it bought $0.83 (hat tip to Professor Ross Forgan of Glasgow University). On open, markets the pound sank to a record low of $1.03 before recovering to around $1.07 as of 9am. Why the hammering? Forex traders are looking for the bottom of the market as economists wonder whether Kwasi Kwarteng actually has a plan or is, as one worried ex-minister put it to the FT, acting as if in a student debating society â€śwhere you can pursue some kind of extreme philosophy without there being any consequencesâ€ť. For his own part Kwarteng, the chancellor, claims to be relaxed about City boys getting over-excited, and confident that his strategy of debt-funded tax cuts will deliver growth in the end. His immediate problem is that this strategy is inflationary, which will require the Bank of England to raise rates, which will raise the governmentâ€™s cost of borrowing. His longer-term problem is that he hasnâ€™t earmarked the investment in renewables needed to fix the energy price crisis that threatens to paralyse the economy this winter. To note: itâ€™s not only sterling thatâ€™s swooning against the dollar. The euro and the yen are too. Sterling is just swooning harder. Further listening: James Hardingâ€™s Editorâ€™s Voicemail on why Kwartengâ€™s mini-budget was a big gamble.
TECHNOLOGYÂ AI, SCIENCE AND NEW THINGS
Deep space dartsÂ
A Nasa space probe called Dart will smash into an asteroid called Dimorphos this evening at 14,000 mph, to see if itâ€™s possible to change the asteroidâ€™s path through space and thereby save the world. Dimorphos is not in fact heading for planet Earth. Rather itâ€™s one of thousands of asteroids Congress has asked Nasa to track to better assess and deal with the overall threat they pose to humanity. Dart, which stands for Double Asteroid Redirection Test, is a proof of concept mission to see if the probe can change Dimorphosâ€™s orbit round a bigger asteroid by smashing into it. If so it follows that a bigger probe could knock an asteroid off course if it was heading for Earth â€“ as in Armageddon, but without Bruce Willis.Â
The 100-year lifeÂ health, education AND GOVERNMENT
Hong Kong CovidÂ
Hong Kongâ€™s chief executive, John Lee, relaxed Covid quarantine measures on Friday and opened the cityâ€™s borders for the first time in two and a half years. The move has been warmly welcomed by the cityâ€™s fund managers, who struggled with a throttled economy over the pandemic â€“ butÂ it may still be too late. Singapore has overtaken Hong Kong on the Global Financial Index to become Asiaâ€™s top financial centre. A significant brain drain and an exodus of companies to cities like Singapore â€“Â which is currently offering flexible five-year visas and almost no Covid restrictions â€“Â leaves Hong Kong on the back foot in terms of regaining its lost status. PCR test hurdles and restrictions on entering bars and restaurants for the first three days for foreign travellers and a continued hard border with Chinaâ€™s neighbouring Guangdong province wonâ€™t help either. A former global financial powerhouse has become a testing ground for mainland China on what happens when Covid rules are eased.Â
Our planetÂ CLIMATE AND geopolitics
The Amazon rainforest is not just getting smaller and emitting more carbon dioxide. Itâ€™s getting less rainy, and if the process continues it will cease being a moist nurturer of life and become a vast, dry expanse of fuel for fire. New research â€“Â based on ten years of data though not yet published in a peer-reviewed journal â€“ shows carbon emissions from the western Amazon basin were 89 per cent higher in 2019 than the average for 2010-18, and 122 per cent higher in 2020. One cause is fire but the main one is illegal logging which has gone unpunished under the presidency of Jair Bolsonaro. The context is a highly political debate over the speed at which the Amazon as a whole is switching from carbon sink to carbon source. Last year the eastern basin appeared to pass that tipping point. Now that the bigger western part seems to be heading in the same direction, the Amazonâ€™s last best hope is to get rid of Bolsonaro. If only trees could vote.
CULTURE soCIETY, IDENTITY AND BELONGING
â€śReferendumsâ€ť designed to enable Putin to annex four regions of Ukraine went ahead as planned on Friday, Saturday and Sunday. Which is to say, at gunpoint. Security camera footage from stairwells in Kherson showed electoral officials knocking on doors with ballot papers in hand and pro-Russian Chechen fighters carrying machine guns at their shoulder. Russian authorities will welcome the results, which are expected to show at least 95 per cent support for Russian rule. The US called them â€śshamâ€ť. Annexation of these territories might allow Putin to say Ukraine is attacking Russia, and to press-gang Ukrainians into fighting their compatriots. The G7 has meanwhile failed to agree a cap on the price of Russian oil in its eighth package of sanctions. So what was the point of kicking Russia out of the G8?
The week ahead
26/9 â€“Â Shadow chancellor Rachel Reeves speaks at Labour Party conference in Liverpool, 27/9 â€“ Keir Starmer speech at Labour conference; Felixstowe port strike by Unite members; Bank of England chief economist Huw Pill speaks at Monetary Policy Forum; ballot closes for pay offer strike by NHS workers in GMB union; Royal mourning for Queen Elizabeth II ends, 28/9 â€“Â Pacific Future Forum hosted by UK government, 29/9 â€“Â Bank of England releases lending data; election of lord mayor of City of London, 30/9Â â€“Â last day when paper ÂŁ20 and ÂŁ50 notes are legal tender; Royal Mail workers in Communications Workers Union begin two-day strike; UK National Accounts published, annual Macmillan coffee morning, 1/10 â€“Â two days of strike action by RMT and Aslef union rail workers begin; new Ofgem price cap comes into effect; 2/10 â€“Â Conservative Party conference starts in Birmingham; London MarathonÂ
26/9Â â€“Â French budget announced for 2023; Elizabeth Holmes scheduled to be sentenced for defrauding Theranos investors; OECD publishes interim economic outlook; AGM for International Atomic Energy Agency member states starts in Vienna; New Zealand public holiday for Queen Elizabeth IIâ€™s death; Rosh Hashana, 27/9 â€“Â Referenda in Russian-controlled areas of Ukraine due to finish; state funeral for former Japanese prime minister Shinzo Abe; Artemis I rocket launch attempt, 28/9 â€“Â first US-Pacific Island Country summit in Washington; International Safe Abortion Day and World Rabies Day, 29/9 â€“Â final televised debate for Brazilian presidential election; Kuwait parliamentary election, 30/9 â€“Â pre-trial readiness hearing for Harvey Weinstein in LA on sexual assault charges; release of FIFA 23 computer game, the last time the game will have FIFA branding, 1/10 â€“Â National day in China; Latvia parliamentary election; Germany to increase minimum wage to â‚¬12 an hour, 2/10 â€“Â Bosnia and Herzegovina general election; first round of presidential election in Brazil
Additional reporting by Giles Whittell, Nina Kuryata and Phoebe Davis.
Photographs Getty Images, NASA
in the tortoise app today
Keir Starmerâ€™s big pitch
With a new prime minister to oppose and a general election less than two years away, whatâ€™s the Labour leaderâ€™s new message to voters?