Rand reacts to mining wage dispute
The rand declined for the first time in three days on Tuesday as gold-mine workers rejected a proposal at the start of wage negotiations in the industry, fuelling concern that labour disruptions may weigh on exports and economic growth.
Trade unions representing gold-mining employees dismissed an offer to increase wages by 4%, increasing the prospects of a further deterioration in labour relations. Commodities account for more than 50% of South Africa’s exports, according to government data.
The country’s central bank will probably leave borrowing costs unchanged this week to support growth, according to a Bloomberg survey of economists.
“Local factors are again increasingly rand negative,” John Cairns, a currency strategist at Rand Merchant Bank said. “The likelihood of major industrial action in the mining sector should be a concern.”
South Africa’s currency retreated 0.3% to 9.8970 per dollar as of 9:35am in Johannesburg.
Yields on benchmark 10.5% bonds due December 2026 dropped eight basis points, or 0.08 percentage point, to 7.87%.
Labour groups and the Chamber of Mines, which represents employers, will reconvene on July 24 to discuss the offer. The South African Reserve Bank will leave its benchmark repo rate at 5% on June 18, according to all 18 economists in a Bloomberg survey.
The central bank has left the rate unchanged since a surprise 50 basis-point cut a year ago. – Bloomberg