Rand strengthens to R13/$ on Mining Charter suspension, US data

Johannesburg – The rand strengthened as much as R13.01 to the US dollar on Friday afternoon.

Analysts say this could be a combination of Mines Minister Mosebenzi Zwane halting the implementation of the contested Mining Charter and movements in the US data.

According to Treasury One, the US consumer price index was at 0.1% month-on-month, compared to the 0.2% markets expected. US retail sales fell 0.2% in June. The dollar weakened, which was positive for emerging market currencies.

Musa Makoni, trading specialist at Easy Equities, told Fin24 that rand strength was mainly driven by the weakening of the US currency.

READ: BREAKING: SA's bombshell Mining Charter halted for now

The Chamber of Mines announced that the Department of Mineral Resources (DMR) has resolved not to implement the charter, pending the results of the court application to interdict the charter.

Finance Minister Malusi Gigaba previously called for the parties to settle the matter outside court, as it would delay the implementation of the “non-controversial” aspects of the charter.

The charter requires mines to be 30% black-owned. The chamber, which represents 90% of the industry, criticised the DMR for the lack of consultation in drawing up the charter and indicated that targets were not agreed upon.

The Mining Charter was one of 14 action items to be finalised by year-end, in an effort to revive the economy.

READ: Players should avoid court battle on Mining Charter – Gigaba

Speaking at the WorleyParsons Supplier Grow Conference on Friday, energy and resource leader at Deloitte Africa Andrew Lane mentioned that the amended Mining Charter will do little to stop the shedding of jobs in the sector.

“I am not saying the Mining Charter is single-handedly responsible for the loss of jobs in this country. There are a myriad of things that go into why the industry is shedding jobs. The fact is the industry is shedding jobs and I don’t think it is going to change in the foreseeable future.”

Lane said that as mines continue to modernise and incorporate digital technology, the profile and number of employees is going to change.

He added that the amended Mining Charter will cost more money to implement. The charter calls for a 1% turnover contribution which will take a “chunk” out of dividend flow, explained Lane. Aspects of the charter are good, such as the employment equity targets. But it will cost more money for companies to comply. “The cost of compliance has gone up.”

Lane added that uncertainty still surrounds the charter, given the court case and the lack of consultation with government. “The bottom line is, this thing is still uncertain.” He recommended that the charter take a broader view in terms of its socio-economic impact. 

The rand was trading at R13.02 at 15:30pm.

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