South Africa finance minister sees 'new normality' for strike-hit rand

Reuters News
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Posted: Oct 10, 2012 6:15 AM
South Africa finance minister sees 'new normality' for strike-hit rand

By Kaori Kaneko

TOKYO (Reuters) - South African Finance Minister Pravin Gordhan said on Wednesday labor strikes in the country's mainstay mining sector have hurt the rand and expressed confidence the currency will bounce back.

Widespread labor unrest has already shut down large parts of the mining industry in the world's top platinum producer and a major supplier of gold, pushing prices of precious metals higher.

"The initial stage of the (rand) depreciation, clearly gloomy news coming from Europe has impacted in our situation," Gordhan told Reuters in an interview ahead of meetings of the International Monetary Fund and World Bank in Tokyo.

"And I'm sure the last 10 days or so, sentiment must have been impacted by the strikes in our country as well. But I'm sure we'll bounce back and get to some level of new normality."

The rand has fallen against the dollar, hitting a 3-1/2 year low earlier this week as the strikes fanned volatility.

Gordhan said the government had taken steps to address the labor unrest, stressing that South Africa was still a "a prime nation" for investment.

"I want to assure everyone concerned that the government as a whole is putting immense efforts to bring together the employer community, trade union movement and the government itself in order to stabilize the situation rapidly as possible," he said.

Gordhan acknowledged that the strikes will have an impact on the economy in the short-term but said the nation has programs to ease such adverse impact.

"We have many programs on the other hand, which are in place and as they begin to operate will mitigate some of the damage that might be done during this period of strikes and dropping exports," he said.

Separately, South African central bank Governor Gill Marcus said the country's economic outlook was deteriorating rapidly.

The IMF said on Tuesday spillovers from the euro zone crisis into Africa have so far been modest except for in South Africa, which has close financial and trading ties with Europe.

The IMF cut its 2013 forecast for South African growth to 3 percent from a July projection of 3.3 percent mainly due to the impact from the continuing euro zone debt crisis. It maintained its 2012 projection of 2.6 percent.

Gordhan said the government would seek to balance the need for enhancing growth and medium-term fiscal consolidation. He will present his medium term budget to parliament on October 25.

He also stressed that his country wants to see greater representation for Africa inside the IMF as part of the institution's long-running reform effort.

"South Africa wants to see the third chair in the IMF board, either within the current arrangement of 24 chairs or by the additional extra chair," he said, referring to the IMF's board of directors.

(Reporting by Kaori Kaneko)