South Africa’s economic outlook is worsening and job losses will mount as strikes spread in Africa’s biggest economy, Reserve Bank Governor Gill Marcus said.
“The outlook at the moment is deteriorating rapidly,” Marcus told students at Rhodes University in the southern town of Grahamstown. Recent capital outflows are an “indicator of a loss of confidence” among foreign investors, she said.
South Africa has been hit by strikes that began at Lonmin Plc’s platinum mine in August, curbing production and prompting the central bank to lower its economic growth forecast for this year to 2.6 percent. The Reserve Bank left its benchmark interest rate unchanged at 5 percent last month after reducing it for the first time in 20 months in July.
“We have been seen as a destination of choice,” Marcus said. “This has all changed over the last few weeks. What is happening now is really of great risk” because there may be “high wage, double-digit wage settlements. One of the inevitable consequences that is likely to come out of it is loss of jobs.”
The rand has slumped 7.1 percent against the dollar since the Lonmin strike began on Aug. 10, the biggest decline of 16 major currencies tracked by Bloomberg. It traded at 8.6973 as of 12:27 a.m. in Johannesburg, down from 8.6788 when Marcus made her comments on the economy.
“The rand is very volatile,” she said. “We do not target a level of the rand. There is no doubt that if you have the rand at this level it makes you more competitive. The reality is that there is no market out there” for manufactured goods.
Lonmin, the world’s third-largest platinum company, ended a six-week illegal strike by workers by agreeing to boost wages as much as 22 percent. Since then, stoppages shut mines owned by Anglo American Platinum Ltd., the world’s biggest platinum producer, and Anglo Ashanti Ltd., Africa’s top gold producer.
Inflation has remained within the central bank’s 3 percent to 6 percent target band in the four months through August, when it measured 5 percent.