The Pound Sterling to South African Rand (GBP/ZAR) exchange rate firmed on Tuesday after the International Monetary Fund cut its global growth forecast and as mining production, data came in below expectations.
According to Statistics South Africa, mining production in the nation fell by -1.2% on a month on month basis in November and was below the preceding month’s revised figure for a rise of 0.6%.
On an annual basis production fell slightly less than forecast by -0.4% from the expected -0.5% drop. The figure suggests that the sector is slowly showing signs of improvement after strike action held earlier in the year crippled certain mining sectors.
Economists remain concerned over the mining sector, as the spectre of strike action is likely to repeat itself in 2015. Striking miners at Northam Platinum are set to hold another mass meeting today to decide on whether to continue a wildcat strike that has already lasted a week.
The move has raised concerns that we could see a repeat of last year’s strikes, which dragged on for months.
The Rand was also struggling to find support after South Africa narrowly missed seeing its credit rating slashed by Fitch last week.
Economists had been forecasting for a rate cut as the national economy continues to be plagued by power cuts. Standard & Poor’s also refrained from cutting but said that the power outages are a major point of concern.
‘At the core this is a story of poor growth, which was part of the reason for our downgrade earlier this year. And if there’s no electricity, this hampers growth and creates a knock-on effect,’ said S&P analyst Ravi Bhatia.
IMF Forecast Weakens ZAR exchange rate
Also weakening the South African Rand was the International Monetary Fund’s decision to cut its forecasts for the South African and wider global economy. The IMF cut its forecast for South Africa’s economic growth this year to 2.1% from 2.3% earlier, the cut was the third made over the past 12 months.
The report highlighted that the South African economy is ‘battling to overcome severe self-inflicted problems’.
‘The lack of meaningful will by government to jump-start planned economic reforms would probably keep growth below par for some time to come. Even so, it would take a more concerted effort between all three major players in the economy – government, business and labour to help boost growth,’ said Manisha Morar, an economist from ETM.
The GBP/ZAR exchange rate is trading in the region of 17.580
