Rand slumps to 4-year low

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IOL bus jul5 weak rand Independent Newspapers File photo: Leon Nicholas

Johannesburg - The rand slumped to a near four-year low against the dollar on Wednesday, breaching the psychologically key 9.0 level, on growing uneasiness about the economy and officials' recent comments on the mining sector.

The rand was trading at 9.0310 to the dollar at 1600 GMT, 2 percent weaker than its close in New York on Tuesday, after earlier dropping to as low as 9.0450, its weakest since April 2009.

Traders said the fall was due to lingering concerns about the country's economy which has been rocked by violent labour unrest, leading to three credit ratings downgrades.

Investors also sold South African bonds after data earlier on Wednesday showed headline consumer inflation rose to 5.7 percent year-on-year in December, from 5.6 percent in November.

In response to strikes in the mining sector last year, platinum producer Anglo American Platinum said last week that it would mothball two mines and cut 14,000 jobs, which has also weighed on the rand.

On Tuesday, the ANC's secretary-general Gwede Mantashe said the company's plans underscored the need for South Africa to take a “bigger interest and control” of the sector.

Mantashe, in an interview with SAFM radio, said that Anglo American, which moved its primary listing to London from Johannesburg over a decade ago, had “stolen our money and ... was built on the back of South African capital and labour.”

President Jacob Zuma was more conciliatory on Wednesday, saying the government needed to “engage” with platinum and gold mining firms about proposed shaft closures and mass lay-offs and was not threatening them with licence reviews. Still, uneasiness about policy is rattling investors.

One trader said the rand could go as low as 9.25 to the dollar in the days ahead.

“The politics surrounding South Africa are not good, especially after yesterday's statement from Gwede Mantashe about the mines,” the trader said.

The yield on the 2026 government bond rose 8 basis points to 7.32 percent and the yield on the 2015 instrument was up 4 basis points at 5.38 percent. - Reuters


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