adminJOHANNESBURG —A four-month strike in South Africa’s platinum mining industry is hampering growth and threatening efforts to narrow the current-account deficit, according to Lungisa Fuzile, the director-general of the National Treasury. “We are always concerned about growth,” he said in an interview yesterday at the African Development Bank ’s annual meeting in Rwanda’s capital, Kigali.
“The signs for the first quarter are not pointing towards a very strong kind of rebound.”
A strike by more than 70,000 workers at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd and Lonmin Plc halted most output and led to a 4.7 percent decline in mining production in the first three months of 2014.
Mining accounts for about two-thirds of exports from South Africa, the largest platinum producer. Growth may slow to an annualised 2.3 percent in the first quarter from 3.8 percent in the prior three months, according to a Bloomberg survey of 26 economists in April.
The work stoppage is worrying, especially when “that occurs at a time when the current-account deficit is hovering at around 5 percent of gross domestic product,” Fuzile said.
“Striking is part of the labour relations processes, but when the strikes get protracted or somewhat violent, then those developments are cause for concern.”
The deficit on South Africa’s current account, the broadest measure of trade in goods and services, and high unemployment were among factors cited by Moody’s Investors Service when it cut the nation’s creditworthiness one level to Baa1, the third-lowest investment grade, in September 2012.
The strike will delay a contraction in the shortfall, Moody’s said on May 16, after the gap narrowed to 5.1 percent of GDP in the fourth quarter of 2013 from 6.4 percent the prior three months.
“Protracted strikes, especially in a sector like mining, which is very important in terms of backward and forward linkages to other sectors, like manufacturing, like the chemical sector, is a cause for concern,” Fuzile said.
“Disruptions in production, even sometimes for short periods of time, are not necessarily good for growth.”
The South African economy, which was overtaken by Nigeria in April as the continent’s largest, will probably expand 2.6 percent this year, according to the central bank, compared with 1.9 percent in 2013. Statistics South Africa will announce the first quarter’s growth on May 27.
The rand may remain around current levels if Europe starts with quantitative easing to fight a deflation threat or if the US recovery temporarily halts the cutback of its monetary stimulus, the director-general said.
“If conditions change in that way there is a chance that the rand would fluctuate within a band more or less around the level at which it is now,” Fuzile said. “But things change very fast.”
The rand has gained 8 percent since hitting a five-year low against the dollar on January 30. The currency was the worst performer among 16 major currencies tracked by Bloomberg last year as it lost 19 percent of its value, partly driven by expectations that the US will start to cut back its asset purchases, leading to an outflow of money from emerging markets.
The risks for the currency are “the policy responses by advanced countries, like the US and Europe, and that those would spill over to South Africa, one way or another, particularly through capital flows or trade,” he said.
“Some data from South Africa, like trade and growth could also have an impact.” — Bloomberg.
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