Rand in free fall as investors flee over strike unrest
On Monday the rand weakened from below R8.80 against the dollar to R9 before settling on R8.93 at 1.30pm.
"The strength of your currency gives you the direction in which capital is flowing," said Chris Hart, strategist at Investment Solution. "And a weaker rand means capital is flowing out of the country.
"And this may be just the beginning. But my concern is not that it is foreign investors, but local investors", Hart said.
Following a five-week-long wildcat strike at Lonmin's Marikana mine in the North West – where management appeased protesting workers with higher wages after 46 people were killed – unprotected strikes have broken out at more than 20 mines across the country and even a protected strike in the transport sector has taken on a harder stance than originally expected.
Wage demands all appear to aspire to the 22% wage hike achieved at Lonmin – and higher.
"Considering all of this, from an investment perspective, you just know competitiveness will take a huge knock in the next few years," Hart said.
Hart said cash on company balance sheets will now be looking for investment outside of South Africa.
Misery index climbing
And the weakening rand is proof that on-going strikes have shaken investor confidence.
The resilience of the rand has regularly been cited by the South African Reserve Bank's Monetary Policy Committee in its decision to hold or cut the repurchase rate. But the currency appears to have finally fallen out of bed.
And a weaker rand pushes up inflation, while wage increases, mining analysts say, will likely result in job losses – meaning the misery index is due to start climbing.
Hart said there needs to be a shift away from the price of labour, to rather consider the quality of labour. "With cost increases of 30% to 40%, there needs to be productivity to go with it."
Hart said the rapid fluctuation of the currency, as observed on Monday, is unusual.