Johannesburg - The five-month strike in the platinum industry has had a “significant” effect on South Africa’s government revenue, Finance Minister Nhlanhla Nene said.
“The actual impact on the fiscus itself has not been quantified but, as you would know, this translated into a contraction in our economy in the first quarter,” Nene told reporters in Johannesburg today.
The world’s three largest platinum companies and the main union at their mines will sign a deal today to end the longest strike in the country’s mining industry after the labour group’s members accepted wage offers from producers.
Gross domestic product contracted an annualised 0.6 percent in the first three months of the year as mining output dropped 24.7 percent, the most in almost half a century.
“The ending of the strike in the platinum sector should have a positive impact on sentiment and ultimately economic growth,” Nene said in a speech.
‘The news of a settlement is most welcome.’’
Standard & Poor’s cut South Africa’s credit rating to one level above junk on June 13, citing concerns that the country’s finances may be harmed by lower-than-forecast economic growth.
Fitch Ratings reduced its outlook on the nation’s creditworthiness to negative from stable.
The government has pledged to narrow the budget deficit to 2.8 percent of GDP in three years’ time from 4 percent in the fiscal year that ended in March.
The rating changes weren’t “unexpected as we’ve just been talking about the contraction at the beginning of the year and also the strike that has been going on for five months,” Nene said.
“We think we are ready to be able to deal with most of the things they raised.”
The rand gained 0.5 percent against the dollar to 10.5426 by 3:14 p.m. in Johannesburg, after climbing 0.5 percent yesterday, boosted by the agreement to end the strike.
The government’s National Development Plan targets average annual economic growth of 5.4 percent to cut the jobless rate to 14 percent by 2020 from 25.2 percent.
Global and domestic economic risks will make it more difficult to implement the 20-year plan, Nene said.
The risks “will require that trade-offs be made in light of limited fiscal resources, the demands of shareholders, and those who help us fund our national ambitions,” he said. - Bloomberg News