South African Manufacturing Loses Luster Following the Ongoing Metal Strike

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The South African manufacturing sector is on the decline following a continuing five-month mining and metal materials strike. The walkout had impacted the profits of several major companies, including General Motors Co. (GE). Significant financial strain has also led Impala Platinum Holdings Ltd. (IMP) to report its lowest earnings in over a year.A report by BusinessWeek states, “A walkout by more than 70,000 miners at the South African operations of Impala, Lonmin Plc (LMI) and Anglo American Platinum Ltd. (AMS) cost the companies about 24 billion rand ($2.3 billion) of stalled output during the stoppage that ended June 24. Amplats, as the largest producer is known, is seeking buyers for four mines and Lonmin warned of possible job cuts as it reviews operations in the wake of the strike.”

Arrested production has put undue economic strain on Africa’s trade in both good and services, as well as inflation rates. For example, The South African rand’s six-month low reflects an increasing dependence on imports.

Reuters notes, “The trade gap increased to 101 billion rand ($9.3 billion) from 75 billion rand in the first three months of the year, with declining commodity prices denting income from exports. Exports excluding gold fell, largely due to lower platinum output after miners went on strike from January to June to demand higher wages.”

The particularly vulnerable export supplies remain gold and platinum as they’re largely linked to the industry fallout. However the manufacturing sector as a whole is interrupted.

According to Bloomberg News, “South African manufacturing declined the most in almost five years in July after a four-week strike disrupted factory output. Production shrank 7.9 percent from a year earlier, compared with a revised 0.2 percent expansion in June, the Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 15 economists was for a 5.8 percent contraction. Output fell 3.6 percent in the month.”

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