Source: Forex News
South Africa is the second largest economy in Africa, with a
Gross Domestic Product of more than $340 billion and a population of more than
56 million. The biggest economy in the continent is Nigeria, which has a
population of more than 190 million people and a GDP of more than $375 billion.
Last year, when the Jacob Zuma administration was kicked out
of government, the hopes among investors was that the country’s economy would
start to grow. They put their hopes on the Cyril Ramaphosa, who became the new
head of state. They loved him because he has never been accused of being
corrupt. They also loved his corporate background.
However, things have not been good in the country. In the
third quarter of last year, the economy grew by 1.4%. In the fourth quarter, it
grew by 1.1%. This was below the global average of more than 3%. Yesterday,
data from the country showed that the mining sector had eased in March. Gold
production declined by 20.6%. This was a lesser decline than the February’s and
January’s decline of more than 22% and 31% respectively. The production has
been declining for years. In the mining sector, the declines came at 7.5%,
which was higher than the 3.2% that traders were expecting. The sector too has
been in decline for years.
The decline in the mining sector has led to major
implications for South Africa, which is a leading country in the production of
precious metals like gold and palladium. The production has declined as the
reserves shrink and as the cost of production has gone up. As such, companies
have been forced to slash their staff. This year, Sibanye Stillwater announced
that it was cutting more than 6000 employees. More than 90K miners are
expecting to be fired as cost of energy continue to increase. As a result, the
unemployment rate has continued to increase, and currently stands at more than 27%.
This month, the USD/ZAR pair declined sharply after the Fed
continued to sound dovish. The central bank has left the interest rates
unchanged at the 6.75% level. As such, the pair has declined from a high of
14.75 to a low of 13.90. On the chart below, this price is slightly along the
21-day and 42-day moving averages while the RSI has started moving up. There is
a likelihood that the pair may move to test the 50% Fibonacci Retracement level