Rand ‘talking cure’ off to a rocky start

2013-06-02 14:00

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A concerted attempt by government and the Chamber of Mines to talk down what Mineral Resources Minister Susan Shabangu this week called a “crisis of perception” around the mines, seems to be backfiring spectacularly.

The charm offensive involving Shabangu, President Jacob Zuma, Labour Minister Mildred Oliphant and the treasury was agreed on last Friday at a meeting between Finance Minister Pravin Gordhan, Shabangu and several mining bosses.

Shabangu used her department’s budget vote speech in Parliament on Tuesday to announce the agreement, which boils down to government being intimately involved in the coming wage talks and exerting pressure to have them go smoothly.

On Thursday, Zuma called a press conference at the Union Buildings in Pretoria on short notice to give an update on the situation, where he largely repeated what Shabangu had already said. The rand started its downward spiral to its lowest level in four years almost immediately.

Peter Montalto, an economist with London-based Nomura Group, who focuses on South Africa, said in a report: “We certainly think it’s an exaggeration to say this speech caused the move. However, the speech certainly did nothing to help and may well have caused markets to think that the government’s response to the situation is to continue the status quo.”

The governing ANC sent out a press release on Friday to “commend President Jacob Zuma’s frank reflections” and criticised “scientifically unfounded” suggestions that his speech triggered the sudden depreciation of the currency.

The treasury’s director-general, Lungisa Fuzile, spent the lasthalf of the week doing interviews on a variety of radio stations and doing the same with newspapers.

The Chamber of Mines held up its part of the agreement and put out statements warmly welcoming both Shabangu and Zuma’s speeches.

In her speech, Shabangu announced that her officials are developing a “rescue plan” for the gold and platinum sectors.

To date, the thinking around the rescue plan seems to revolve around an agreement with Russia to collaborate in influencing the price of platinum.

Montalto went on to detail the kinds of announcements that he believes may help the situation.

Among those are an announcement that both unions – the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union – and companies would compromise on restructurings like the one Anglo Platinum is renegotiating with unions and government after initially announcing job cuts.

Another suggestion is that the lingering suspicions that government is biased towards the NUM be adequately dispelled.

Both these seem far from realisable after Shabangu last Friday, shortly after her meeting with the Chamber of Mines, gave a speech at a NUM meeting equating the “attack on the NUM” with a plot to overthrow the ANC.


On Friday, the rand traded as cheaply as R10.30 against the US dollar, but settled on R10.06 by the end of the day.

A depreciating rand is felt most keenly through the imported inflation on especially oil, which is by far the country’s largest import.

The regulated price of petrol and other fuels largely depend on the price of imported oil and, as a result, the depreciating rand will likely soon erode the lower prices made possible by a falling dollar oil price.

Other items that immediately cost more include the variety of half-manufactured car parts that underpin the local motor manufacturing industry and constitute the country’s second-largest import category.

After that, the major import is cellphones, of which South Africa imported nearly 20?million last year, costing in the region of R15?billion, according to customs data from the SA Revenue Service.

South Africa’s major imported foodstuffs are rice, soya beans and alcohol.

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