Prolonged Strikes Will Pressure South Africa ETF

ETF Trends

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 (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.

Moody’s has changed its outlook on South Africa’s debt from negative to positive after the African national Congress’ victory in last week’s general elections. The ratings agency argued that the victory paves the way for the government to go ahead with the new National Development Plan, which will address unemployment, poverty and inequality, SouthAfrica.info reports.

“The new mandate is also a licence to continue with our ambitious infrastructure build programme, and ensure the provision of better roads, universities and colleges, hospitals, dams, railway lines and power stations that boost economic and social development,” President Jacob Zuma said. [South Africa ETF Strengthens on Elections Results]

iShares MSCI South Africa ETF

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For more information on South Africa, visit our South Africa category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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