Bloomberg, Franz Wild, Mike Cohen
South African President Jacob Zuma said mining strikes are having a “significant” impact on an
economy already struggling to cope with Europe’s debt crisis.
The National Treasury estimates that 4.5 billion rand ($518
million) of platinum and gold mining production was lost as at
the middle of September, and 118 million rand of coal, Zuma said
in a speech to black businessmen in Johannesburg today.
The strikes began at Lonmin Plc (LMI)’s platinum mine in August
and spread to operations owned by Anglo American Platinum Ltd. (AMS)
The country’s gold mines, including those of AngloGold Ashanti
Ltd. (ANG), Gold Fields and Harmony Gold Mining Co., have also been
affected. A strike by more than 20,000 truck drivers is now in
its third week, resulting in food and fuel shortages in some
parts of the country.
“The ongoing strikes in the mining sector have had a
significant effect on the economy,” Zuma said. “Our economic
data does not indicate a significant drop in business confidence
yet, but our responsibility is that we do not reach a crisis
Reserve Bank Governor Gill Marcus said yesterday the
economy’s outlook is “deteriorating rapidly” and strikes will
result in job losses. Recent capital outflows are an “indicator
of a loss of confidence,” she said.
The rand has slumped 5.1 percent against the dollar in the
past three months, the most of 16 major currencies tracked by
Bloomberg. It was trading at 8.7118 per dollar as of 2:50 p.m.
“A dip in investor confidence will result in lower
investment and job creation,” Zuma said. “Lower foreign
investment can raise the cost of government borrowing since
foreigners hold about 37 percent of all rand-denominated debt.”
Moody’s Investors Service on Sept. 27 cut the nation’s
credit rating to Baa1 from A3, with a negative outlook, citing
the government’s inability to deal with economic and political
challenges. The ratings company estimated the economy will
expand 2.5 percent this year, the slowest pace since a 2009
recession, and 3.3 percent in 2013.
Moody’s downgrade is based on reasons that “are not new to
government,” Zuma said. South Africa is investing in rail and
power infrastructure, reducing its budget deficit, and
stabilizing its debt to address concerns raised by the ratings
companies, he said.
The Cabinet reiterated Zuma’s comments in a statement today
after a scheduled meeting.
“Cabinet remains committed to taking the necessary
measures to lift the growth potential and competitiveness of the
South African economy,” Richard Baloyi, minister of cooperative
governance and traditional affairs, told reporters in Pretoria.
The government will ensure that the “impact of the downgrade is
constrained and does not encroach on already constrained
resources for service delivery programs.”
Visiting U.K. Business Secretary Vince Cable said
“serious” investors were not unduly concerned about the labor
Their “assessment is South Africa is an open economy and
it approaches foreign investments in a positive and welcoming
way,” he told reporters in Cape Town. “There will always be
individual instances where companies have difficulties for one
reason or another, but the regime is a good one. I would
certainly try to reassure any British investors that was indeed
Zuma and the government condemned the violence associated
with the strikes in recent months. About 46 people died in
violence during Lonmin’s six-week strike, with 34 of them killed
by police. Striking transport workers have stoned and set alight
trucks, killing at least one person.
“The culture of violence in strikes and demonstrations
does not tally with our principles of democracy,” Zuma said.
“The destruction of property, the beating up of other people
and killing them is not acceptable.”
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