South African Rand Sags On Country’s Economic Woes

Jacob-Zuma

VENTURES AFRICA – South African rand slumped to a near four-year low against a basket of currencies, including the US dollar, late on Wednesday as lingering concerns about the country’s economy took their toll.

The South African economy has been rocked by violent labour unrest since August last year, leading to three credit ratings downgrades.

The rand breached the psychologically key 9.0 level and was trading at 9.0310 to the dollar at 1600 GMT, 2 percent weaker than its close in New York on Tuesday, after earlier dropping to as low as 9.0450, its weakest since April 2009.

Reuters said investors also sold South African bonds after data earlier on Wednesday showed headline consumer inflation rose to 5.7 percent year-on-year in December, from 5.6 percent in November.

In response to strikes in the mining sector last year, platinum producer Anglo American Platinum (Amplats) said last week that it would mothball two mines and cut 14.000 jobs, which has also weighed on the rand.

On Tuesday this week, the ANC’s secretary-general, Gwede Mantashe, said the company’s plans underscored the need for South Africa to take a “bigger interest and control” of the sector.

Mantashe, in an interview with SAFM radio, said that Anglo American, which moved its primary listing to London from Johannesburg over a decade ago, had “stolen our money and … was built on the back of South African capital and labour.”

But President Jacob Zuma was more conciliatory on Wednesday, saying the government needed to “engage” with platinum and gold mining firms about proposed shaft closures and mass lay-offs and was not threatening them with licence reviews. Still, uneasiness about policy is rattling investors. One trader told Reuters the rand could go as low as 9.25 to the dollar in the days ahead.

“The politics surrounding South Africa are not good, especially after statement from Gwede Mantashe about the mines,” the trader said.