South Africa’s credit rating is at risk as strikes by miners and metalworkers threaten economic growth and the government’s ability to rein in debt, Moody’s Investors Service said.
A walkout by 220,000 metalworkers that began on July 1 may curb a third of output in manufacturing, Moody’s said in an e-mailed report today. It follows a five-month strike in the platinum industry that ended last week, which caused the economy to contract in the first three months of the year.
“Continued weak investment, exports and overall growth will pose serious challenges to the government’s efforts to rein in its budget deficit and stabilize its debt metrics, a credit negative for the economically troubled country,” Moody’s said.
Moody’s has had a negative outlook on South Africa’s Baa1 credit rating since November 2011. That’s two levels above Standard & Poor’s, which downgraded the nation’s debt on June 13 to BBB-, the lowest investment grade level.
The strikes are making it difficult for South Africa to take advantage of a recovery in growth in its main trading partners, such as Europe, Moody’s said. Finance Minister Nhlanhla Nene said on July 1 the economy will probably miss the government’s 2.7 percent growth target this year because of the stoppages.
“South Africa’s reputation among investors is being increasingly damaged by the strike-prone nature of its economy,” Moody’s said.
The National Union of Metalworkers of South Africa will resume wage talks tonight with the employers’ group, the Steel and Engineering Industries Federation of Southern Africa, Castro Ngobese, a spokesman for the union, said in a text message yesterday. The strike over wages affects more than 10,000 companies, including Bell Equipment Ltd. (BEL) and Evraz Highveld Steel & Vanadium Ltd.
The walkout has disrupted the construction of two power plants that will each generate about 4,800 megawatts to a grid under strain. About 30 percent of contract workers haven’t reported for work at the sites since the strike started, Andrew Etzinger, a spokesman for , which provides about 95 percent of South Africa’s electricity, said in a phone interview.
Police used rubber bullets to disperse about 400 to 500 protesting workers blocking the entrance to Eskom’s Medupi plant in Limpopo province today, police spokeswoman Ronel Otto said by phone.
Numsa is seeking wage increases of 12 percent, which employers have offered as much as 8 percent in the first 12 months of a three-year agreement.
The rand gained 0.1 percent to 10.7448 against the dollar as of 6:11 p.m. in Johannesburg, taking its slide this year to 2.4 percent.
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