South Africa’s platinum strikes continue as rand slides
Strikes in South Africa’s platinum sector have affected the balance sheets of mining companies but they’re also taking a toll on the country’s economy.
South Africa’s Reserve Bank said on Wednesday that the extent to which strikes will impact export levels and as a result the country’s current account deficit is still unknown, but the mining sector is expected to remain “under pressure” as work stoppages at major platinum mines continue – and threaten to spread into the gold sector.
The strike’s effects will depend on how long they last and “the extent to which lost output can be compensated for by running down inventories,” the Bank wrote.
Workers began labour action last week at the world’s three largest platinum producers, Anglo American Platinum (LON:AAL), Imapala Platinumm and Lonmin (LON:LMI). Together the companies’ mines produce half of the world’s platinum. South Africa relies on metal exports for more than half of its foreign-exchange earnings, according to Bloomberg.
Companies have been resisting union demands to more than double wages, pointing to weak metal prices as an indication that they can’t afford such increases.
As a result of labour action in 2012, Anglo American reported a 29% drop in output that year.
South Africa’s Reserve Bank said that mining output had “somewhat” recovered in the final quarter of 2013 following a weak September and that the “sector is expected to have made a positive contribution to fourth quarter growth.”
Last week the rand weakened to its lowest level against the US dollar since October 2008. In response, the Reserve Bank raised its benchmark interest rate by half a percentage point to 5.5% on Wednesday, following the lead of central banks in Turkey and Brazil. The move only put more pressure on the currency.