S. Africa Credibility Damaged With Strikes, Gordhan Says
South Africa’s credibility with investors has been hurt by the strikes that are limiting growth in the continent’s largest economy and have led to two credit- rating downgrades, Finance Minister Pravin Gordhan said.
The government and businesses are addressing the concerns of ratings companies and the causes of the strikes in the mining industry, Gordhan said yesterday in a speech in Johannesburg.
The strikes “have damaged the credibility of South Africa,” Gordhan said. “It has created doubt in a certain class of investors.”
South Africa’s economy is growing this year at the slowest pace since a 2009 recession as strikes that started in platinum mines and spread to gold operations cut output and exports. A recession in Europe is also hurting demand for manufactured exports. Walkouts have cost more than 10 billion rand ($1.1 billion) in lost mine output and will probably shave about 0.5 percentage point off economic growth, Gordhan has said.
About 3,000 workers at Lonmin Plc’s Marikana platinum mine downed tools on Aug. 10 demanding better pay. More than 46 people died in clashes at the mine northwest of Johannesburg, the worst mining violence since the end of apartheid. Workers at AngloGold Ashanti Ltd., Anglo American Platinum Ltd., Kumba Iron Ore Ltd., farm workers and transport workers later went on strike as well. The strike at Anglo American Platinum, the world’s largest producer of the metal, ended yesterday.
Moody’s Investors Service cut the nation’s credit rating one level to Baa1 on Sept. 27, citing growing pressure on the government to boost social spending in a nation where one in four people don’t have jobs. Standard & Poor’s lowered the rating one step to BBB, in line with Mexico, Russia and Brazil, on Sept. 12, citing the nation’s widening budget deficit.
The rand has dropped 7.3 percent against the dollar since Moody’s cut the nation’s rating, the worst performer among the 16 major currencies tracked by Bloomberg. The currency rose 0.5 percent to 8.8855 per dollar as of 9:56 a.m. in Johannesburg after falling to its lowest in three years yesterday.
The government lowered its forecast for economy growth to 2.5 percent on Oct. 25 from a previous estimate of 2.7 percent.
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