Dramatic Zuma intervention fails to halt currency’s plunge to R10/$
Growth slowdown prompts live speech to lift confidence Insists state ‘neutral’ in rivalry between unions ‘Making bland reassurances isn’t going to calm market’
PRESIDENT Jacob Zuma yesterday moved to bolster confidence in the manner in which his government is addressing crumbling investor sentiment towards SA as a whole and the mining sector in particular, but economists said his efforts had “fallen flat”.
The rand weakened by nearly 2% after the speech, breaching the key R10/$ level to R10.09/$ on a mixture of factors, which some traders said included disappointment over Mr Zuma’s speech. The rand has fallen 15% this year.
Nomura economist Peter Attard Montalto said the Reserve Bank and the government could try “verbally” to prop up the currency, but “they will have to do better than Zuma’s speech … which fell flat with zero new policies or reassurances to the market, which let’s remember was the primary target of the speech.”
SA needed a “stable and growing” mining sector given the importance of this industry to the economy‚ Mr Zuma told a media conference in Pretoria.
He warned that SA’s pace of economic growth must be “much higher” than the 0.9% increase seen in the first quarter if an official goal of annual growth of 2.7% is to be achieved this year. “We need faster growth. “Without faster growth we cannot succeed in reducing unemployment‚ poverty and inequality‚” Mr. Zuma said.
Mr Zuma has given Deputy President Kgalema Motlanthe the task of leading the engagement with mining companies and organised labour, with the assistance of the mineral resources, finance and labour ministers. It is the first concrete step the government has taken to address the burgeoning problems besetting the sector.
Deputy Reserve Bank governor Daniel Mminele said last night the fall in the rand was somewhat exaggerated. Speaking at a function at the Reserve Bank, Mr Mminele said the Bank had no exchange rate target. This should not be misread to suggest that any abrupt and disorderly movements in the exchange rate would not be of concern to the Bank.
“Excessive currency volatility increasingly risk complicating the tasks of both monetary fiscal policy,” he said.
The rand has steadily underperformed the currencies of its commodity-producing or emerging market peers over the past year. This trend indicates a growing sensitivity of the currency to domestic factors such as violent labour conflicts in the mining and other sectors, he said.
Finance Minister Pravin Gordhan has a key role to play in convincing investors that the government is on top of the crisis in which the mining industry finds itself, a move seen by some as sidelining Mineral Resources Minister Susan Shabangu, who should champion the industry.
“The minister of finance has been using every available opportunity to reassure foreign and domestic investors of our seriousness and commitment to the mining sector and to affirm confidence in SA as an investment destination. He has been assigned to continue with this task,” Mr Zuma said at the hastily convened media conference in Pretoria.
The industry was crying out for strong leadership, particularly in dealing with labour — which brought platinum and gold mines to a halt last year with wildcat strikes — and calming investors’ fears, Webber Wentzel mining law specialist Peter Leon said.
“The crisis in the mining industry is serious enough, and the impact it’s having on the economy is so huge, that it really does require effective presidential leadership and intervention,” he said.
“Hopefully this is just the start and that we’ll see more action on his (Mr Zuma’s) part because just making bland reassurances isn’t going to calm the market.”
Mr Zuma asked participants in
wage talks which are due to start
in the coming weeks to find “fair and expeditious settlements” in the interests of preserving jobs.
“I urge business, organised labour and government to continue engaging constructively. Everything we do must be designed to strengthen and stabilise the sector, and ensure that it serves all stakeholders,” he said.
Mr Zuma said the government was not taking sides in the turf war between the National Union of Mineworkers, an ally of the ruling African National Congress (ANC), and the Association of Mineworkers and Construction Union (Amcu), which claimed about 50 lives in violence on mines last year.
“The government has not taken any stance that takes sides in how we relate to the miners or labour organisations on the mines. The fact that Cosatu (the Congress of South African Trade Unions) is in alliance with the ANC has never made us fail to deal with things properly and fairly, without choosing political friends or comrades,” he said, adding that the government was “engaging” Amcu.
But Amcu president Joseph Mathunjwa said his union had written to Mr Zuma after police shot 34 protesters at Marikana last August and received no reply. Mr Mathunjwa said recent statements by Cabinet ministers attacking Amcu had not helped create a conducive environment for pay talks.
In an address to the National Union of Mineworkers (NUM) central executive, Ms Shabangu made veiled references to Amcu, giving the impression the government was backing the NUM which has lost its majority position on the platinum mines and some key gold mines to Amcu. “I do not think we could have imagined, 19 years after democracy, we would deal with ‘trade unions’ whose actions amount to an attack on the freedom of association, assembly and speech,” she said.