Cape Town - South Africa’s platinum-mining industry strike will have a “profound” effect on exports, delaying a contraction of the deficit on the country’s current account, according to Moody’s Investors Service.
The stoppage, which has halted production at South Africa’s three biggest platinum miners since January 23, is negating the benefits of a weaker rand and preventing jobs growth, Kristin Lindow, a senior vice-president at Moody’s, said in an interview in Cape Town today.
“You had good signs towards the end of last year of significant improvements in the current-account deficit as a consequence of the improvement in competitiveness, primarily as a consequence of the weaker rand,” she said.
“It was expected that the current-account deficit would narrow further this year. That expectation may be dashed if the impact on exports is as profound as we expect it to be in the first half of the year.”
The deficit on South Africa’s current account, the broadest measure of trade in goods and services, and high unemployment were among factors cited by Moody’s when it cut the nation’s creditworthiness one level to Baa1, the third-lowest investment grade, in September 2012.
The company has a negative outlook on the country’s debt, meaning the next ratings move is more likely to be down rather than up.
About 70,000 workers who are members of the Association of Mineworkers and Construction Union are on strike to seek wage increases companies including Lonmin Plc and Anglo American Platinum Ltd. say they can’t afford.
The union wouldn’t sign a labour relations framework deal brokered by the government last year to prevent disruptions in mining, which account for 60 percent of export earnings in South Africa, the world’s biggest producer of platinum.
The rand has dropped 10 percent over the past 12 months, the most among 16 major currencies tracked by Bloomberg.
“It’s truly ironic that so much effort was expended on signing that agreement last summer and the one holdout has cost them all this damage,” Lindow said.
“We’re in a time when exports should be strengthening as a consequence of the improvement in the external environment as well as the benefits that have been derived from a weaker rand.” - Bloomberg News