/ 21 May 2013

Rand weakens to four-year low ahead of mining wage talks

Current account data means the rand is likely to remain weak and stoke inflationary pressures.
Current account data means the rand is likely to remain weak and stoke inflationary pressures.

Labour unions are demanding wage increases of as much as 60% from gold and coal-mining companies, boosting the chances of more strikes as the industry struggles to contain rising costs.

A two-day stoppage at Lonmin's Marikana platinum mine last week reignited investor concern that a rivalry between unions may lead to violence.

"The battle lines are drawn ahead of the mining sector's upcoming wage negotiations," Nomvuyo Guma, an analyst at Standard Bank Group in Johannesburg, said in emailed comments today.

"Concerns over the possibility of further disruptive strikes on the back of these wage demands have been a major contributing factor to the rand's recent renewed weakness."

The rand declined 0.6% to 9.4971 per dollar by 10:27am in Johannesburg, bringing its decline since May 8 to 5.4% in the longest losing streak in a year.

The currency fell as low as 9.4975 per dollar, the worst intraday level since April 2009. Yields on benchmark 10.5% bonds due December 2026 dropped one basis point to 6.93% after rising 10 basis points yesterday.

Mining strikes cut about R15-billion rand from output last year, pushing the current-account deficit to a four-year high and contributing to the rand's 13% slide in the past 12 months. Metals and other commodities accounted for 53% of South Africa's exports in 2012, according to government data. – Bloomberg