The rand declined for the first time in three days and bond yields rose to the highest this month as unrest in South Africa’s mining industry undermined investor confidence in Africa’s biggest economy.
The rand retreated 0.7 percent to 8.2667 per dollar as of 10:36 a.m. in Johannesburg, the worst performance out of more than 25 emerging-market currencies monitored by Bloomberg. Yields on 6.75 percent bonds due 2021 climbed six basis points, or 0.06 percentage point, to 6.82 percent, the highest on a closing basis since Aug. 28.
Production at mines owned by Lonmin Plc, Golds Fields Ltd. and Anglo American Platinum Ltd. has been halted last week by a series of illegal strikes over pay. At least 45 people have been killed since Aug. 10 at Lonmin’s Marikana mine in the North West Province. The spreading unrest comes as South Africa posts its biggest current-account deficit in almost four years. Foreign investors sold a net 5.3 billion rand of South African stocks and bonds last week, according to JSE Ltd. data.
“Between our current account and the political backdrop and ensuing mining crisis, South Africa is not high on investors’ radar, hampering portfolio inflows,” Brigid Taylor, head of institutional flow sales at Johannesburg-based Nedbank Group Ltd., said in e-mailed comments today. “The mining disruption will negatively impact gross domestic product as well as tax revenues, which bodes ill for continued bond support from foreigners.”
Finance Minister Pravin Gordhan said the violence could curb growth, production and exports, widen the current account deficit and deter investment, which would be “extremely damaging” to Africa’s largest economy.
The gap in South Africa’s current account, the broadest measure of trade in goods and services, grew to 6.4 percent of GDP in the second quarter, the widest shortfall since the third quarter of 2008, from 4.9 percent in the first quarter, the Reserve Bank said Sept. 11.
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