THE massacre at Lonmin's Marikana operations will have a "huge effect" on investor sentiment, further hampering economic growth and job creation in an economy characterised by high unemployment and inequality.
Developments at Lonmin already had equity investors worried, "even though the situation was perhaps somewhat depressingly predictable. Every year we see various wage negotiation rounds, strikes and production cuts," said Peter Montalto, a London-based director at Nomura.
However, the police killings of protesters on Thursday have "taken things to a new level", spreading the "fear to currency and bond market investors", Montalto said. More worrying is the likelihood of union rivalry spreading to other sectors such as the motor-manufacturing industry, he said. "This is not really a topic that is going to go away."
By close of business on Friday, the rand showed its biggest weekly decline since May, according to Bloomberg data. Foreign investors were net sellers of R3.1bn of bonds in the past two weeks.
"All the troubles we are seeing on the platinum mines is not just hurting investor perceptions. It is hurting the actual performance and results of these operations, and terribly too," said Peter Major, mining consultant at Cadiz Corporate Solutions.
"It might lead to slightly better PGM [platinum group metals] prices, but what a horrible way to accomplish that," Major said.
Lonmin's share price on the JSE declined 0.5% to R83.30 on Friday, its lowest level since August 2008. It has shed 41% over the past year. Platinum prices rose to their highest levels since the beginning of July, gaining 4.9% from Thursday to $1,464.38 an ounce.
The miner said on Thursday it had lost six days of mined production, representing about 300,000 tons of ore, or 15,000 platinum-equivalent ounces. A similar dispute at Impala Platinum earlier this year lasted for six weeks and cost the company 200,000 ounces of platinum and an estimated R2bn in lost revenue.
A mining analyst in London said that there had been a discount on South African platinum stock for many months owing to the inter-union rivalry.
"Many investors prefer to gain exposure to the white metal through investment vehicles such as exchange traded funds [ETFs] rather than buying into futures or platinum companies," he said.
Following Thursday's shooting, trading in platinum-backed ETFs sky-rocketed. The ETF Securities Physical Platinum Shares fund, that usually trades about 39,000 shares a day, saw volumes grow to 350,000 shares a day.
The incident will have a "huge" effect on investor sentiment and will have a ripple effect on other industries, said Albert Wocke, professor at the Gordon Institute of Business Science.
"Instead of looking after members, all focus and attention is on [the ANC's election conference in] Mangaung, and there is a Cosatu leadership election coming up. If this moves to another industry it will absolutely rattle Cosatu," Wocke said.
"Cosatu is a responsive federation — they will move to bread- and-butter issues," which will result in increased pressure on the ANC to fulfil service-delivery promises, Wocke said.
Zimbabwe's Movement for Democratic Change (MDC) was born out of trade union opposition to Robert Mugabe's Zanu-PF.
"I would say we are about two to three years away from an MDC-type political party in South Africa," Wocke said.
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