News that the South African gold mining industry may this weekend face its first large-scale strike since 1987 should not impact on the rand according to foreign currency traders, as gold now makes up far less of South Africa’s foreign exchange earnings than in 1987.
South Africa’s three major gold miners — AngloGold, Gold Fields and Harmony — all face a strike from Sunday, while two of the country’s coal miners — BHP Billiton’s Ingwe and Kuyasa — also remain on course for strike action, National Union of Mineworkers (NUM) spokesperson Moferefere Lekorotsoana said on Wednesday.
“Gold amounts to less than a eighth of South Africa’s exports, whereas in 1987, when we had the last major gold mining strike, gold was around half of exports. I think the strike has already been priced in,” a currency trader said.
In the first quarter of 2003, gold exports amounted to R8,9-billion or less than R100-million a day. Non-gold exports amounted to R63.1-billion in the first quarter, giving gold only a 12,4% share in goods exports.
Service receipts from tourism and financial services at R12-billion are 35% larger than gold exports. If service receipts are included as part of foreign exchange earnings, then gold’s share drops to 10,6%.
In the second quarter 1987, the quarter before the 1987 strike started in August, gold accounted for 41,5% of total goods exports and were two-and-a-half times larger than services receipts. This meant that gold exports amounted to 35,6% of foreign exchange earnings.
Another trader said that capital flows swamped traded flows with daily foreign exchange turnover in excess of $8-billion on the South African market compared with less than $8-billion a month in foreign trade. Net daily turnover on the South African foreign exchange market was $8,423-billion in March 2003.
“How can you compare the impact of capital flows with foreign trade flows, when capital flows are at least 20 times the size of trade flows. Just look at the bond statistics and the net purchases of South African bonds easily swamp what the gold exports brought in yesterday,” he said.
Foreigners were net buyers of R672 538-million worth of South African bonds on Tuesday whereas gold exports brought in less than R100-million. – I-Net Bridge