Bloomberg News

Rand Weakens as South Africa’s Mining Output Falls; Bonds Gain

March 13, 2012

The rand weakened after a report showed mining production slumped, increasing speculation of slowing growth in Africa’s biggest economy. The bond due 2021 rose for a second day.

The currency depreciated 0.2 percent to 7.5583 per dollar as of 4:51 p.m. in Johannesburg. The yield on the nation’s 77 billion rand ($10 billion) of 6.75 percent bonds due 2021 fell two basis points, or 0.02 percentage point, to 7.82 percent.

Mine output dropped 2.5 percent in January from a year earlier, Statistics South Africa reported, while gold production slumped 11 percent. Retail sales growth slowed in January to the lowest rate in six months, a report tomorrow will show, according to the median estimate of nine economists in a Bloomberg survey.

“The lackluster performance in mining production bodes ill for our growth,” Tebogo Mosepele, an analyst at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “The contraction of mining production is rand-negative from both a growth differential and a balance of payments perspective.”

Metals and other raw materials account for 65 percent of South Africa’s exports and the mining industry is the biggest private-sector employer, according to government data. South Africa has the world’s biggest mineral reserves, according to Citigroup Inc., and is the biggest producer of platinum and chrome.

Mining plays a “critical role” in South Africa’s economic development, President Jacob Zuma said Feb. 10, when he announced a 300 billion-rand ($40 billion) program to upgrade roads and railways. South Africa has a 24 percent unemployment rate, the highest among more than 60 countries tracked by Bloomberg.

The U.S. Federal Reserve meets today to review monetary policy after a report showed American retail sales rose in February by the most in five months.

“It is usual for markets to go into hibernation before a Fed meeting so market moves today might be limited,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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