Rand Falls to 5-Year Low as South African Platinum Strike Looms

South Africa’s rand slumped to a five-year low on concern that labor disputes at the world’s three biggest platinum producers will weigh on mining output and dent the nation’s exports.

The Association of Mineworkers and Construction Union, the most powerful labor group at the South Africa’s platinum mines, plans meetings with its members this week to test whether workers want to strike over pay. Mining output increased 7.1 percent in November, down from growth of 22 percent the month before, a report may show today, according to the median estimate of four economists in a Bloomberg survey.

“Labor unrest rears its head again,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said in e-mailed comments. “The rand seems intent on moving toward 11 per dollar as importers continue to scramble for dollars and exporters are quite happy to sit on the sidelines.”

The rand declined 0.5 percent to 10.8798 per dollar, the weakest level since October 2008, by 9:22 a.m. in Johannesburg. Yields on benchmark rand bonds due December 2026 climbed seven basis points, or 0.07 percentage point, to 8.26 percent.

A coordinated strike by AMCU members would paralyze production at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc. The union won the legal right in the final quarter of last year to down tools at the companies.

“Sentiment is extremely negative and the risk of ongoing rand losses is obvious,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in an e-mail. “The list of local negatives is long,” including the prospect of strikes, he said.

Mining Data

Platinum accounts for about 8 percent of South Africa’s export earnings, with mining commodities making up more than 50 percent of the country’s exports, according to government data. South Africa is world’s biggest producer of platinum.

The mining data may provide evidence of whether the export industry is benefiting from the rand’s 19 percent slump over the past year. The Reserve Bank left its benchmark repurchase rate at a three-decade low of 5 percent since July 2012 to help stimulate growth. Even so, the rand’s weakness hasn’t yet improved exports, Governor Gill Marcus said on Jan. 7.

Foreign investors bought a net 664 million rand ($61 million) of South African bonds yesterday, snapping seven straight days of outflows, according to JSE Ltd. data.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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