With no end in sight for the strikes on three South Africa’s three largest platinum miners, an extended economic malaise could weigh on the South Africa country-specific exchange traded fund.
The iShares MSCI South Africa ETF (NYSEArca: EZA) has gained 7.2% year-to-date.
Moody’s Investors Service warned that the prolonged strikes will have a “profound” effect on exports, negate the benefits of the weaker rand currency and prevent jobs growth, IOL reports.
“You had good signs towards the end of last year of significant improvements in the current-account deficit as a consequence of the improvement in competitiveness, primarily as a consequence of the weaker rand,” Kristin Lindow, a senior vice-president at Moody’s, said in the article.
The mining industry accounts for 60% of export earnings in South Africa.
“It was expected that the current-account deficit would narrow further this year,” Lindow added. “That expectation may be dashed if the impact on exports is as profound as we expect it to be in the first half of the year.”
Impala Platinum’s Rustenburg mine has stated that the “devastating” strike has cost the company over $500 million in revenue, reports Nigel Wilson for International Business Times. Additionally, the prolonged strike has cost employees $134.8 million in lost wages.