From Gareth Stokes, MoneyWeek editor,

Dear Money Morning Reader,

How can you tell when an economic recovery is underway? Economists look at an array of macroeconomic indicators – market analysts focus on share price movements – but you probably take a quick peek at your personal financial statements. If there’s more money left at the end of the month and your debt is declining the last thing you’re thinking about is recession.

You can learn a great deal about an economy by looking at daily newspaper headlines. Earlier this week the nation was more concerned with football coaches and extravagant police ministers than share prices and sales statistics. If you don’t already know the national football coach was sent packing by the South African Football Association, but you’ll have to wait a while to read about his handsome severance package! And opposition parties are up in arms over police minister Nathi Mthethwa’s massive accommodation bills. His stays at five start hotels in Cape Town and Durban cost taxpayers R850,000!

There are economic stories sending ripples through the country’s economic fibre too. You’ve probably heard that resources giant Rio Tinto pulled the plug on its much anticipated aluminium smelter investment at Coega in the Eastern Cape. Public opinion is divided. There are those who lament the loss of foreign direct investment and job opportunities. Others welcome the decision, saying South African taxpayers cannot subsidise another aluminium smelter.

Whichever faction you support you should be concerned about the reason for the company’s decision. They pulled out of a multi-billion rand investment because Eskom couldn’t provide satisfactory guarantees on electricity supply.

It appears Eskom has found a backdoor to switch South Africa’s lights off. Instead of mismanaging the country’s power production facilities to create countrywide blackouts the state electricity supplier has plans to price its product out of the market. If their latest multi-year tariff application is approved you will have to foot an annual increase of 45% for the  next three years. These increases will wreak havoc on your monthly budget and inflict untold damage on small business and the economy! Can South Africa absorb these electricity price hikes?

In a 2009 study titled Aggregate electricity demand in South Africa: Conditional forecasts to 2030 economists say a 30% increase in electricity prices will cut real economic growth by 0.85% per annum. Higher electricity  charges will filter across every sector of the economy. The study predicts a 2.25% decline in unskilled employment, a 1.85% reduction in skilled wages and a 1.23% dent in household consumption expenditure. The kicker is a massive 6.67% fall in fixed investment.

Compound these negative effects over three years and the country could be brought to its knees. Will commonsense prevail when Nersa meets to discuss the multi-year tariff proposal? You will have to wait until February 2010 to learn your fate!

Without cheap and reliable power modern economies practically grind to a halt. There are  numerous African countries where businesses rely on rationed power of only one or two hours per week. Who knows – two decades from now you might be living in an economy dominated by agriculture! In this week’s feature article Eoin Gleeson discusses the second green revolution. He looks at various trends in the agriculture sector and tells you how to profit from them. If you want to know more about the Doomsday vault, genetically modified crops and the influence of bio-fuel on food crops, then check out this weeks MoneyWeek.

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Turning to the markets...

The JSE all share index grew 0.26% on Friday. The gold mining index slipped 0.36%. Resources jumped 0.69%. Banks and financials closed down 1.19% and 0.49% respectively. Industrials climbed 0.18% and the platinum mining index increased 0.72%.

London's FTSE100 added 0.68%. The Dow Jones lost 1.08% and the Nasdaq fell 0.5%.

Tokyo's Nikkei climbed 0.76%. Hong Kong's Hang Seng gained 1.71%.

Brent crude is currently trading at $78.40 per barrel.

Spot gold's trading at $1,055.30 and platinum was last quoted at $1,355.00.

And here's how the rand is performing against the major currencies:
R/$7.47
R/₤12.17
R/€11.23