Slowdown of capital inflows into South Africa bodes ill for weakening rand, given large current account deficit, writes Mariam Isa Labour unrest and rating agency downgrades have led to an abrupt slowdown of capital inflows into SA, which does not bode well for the weakening rand.The currency is already under pressure from the swollen deficit on the current account, its broadest measure of trade in goods and services. The shortfall makes SA heavily dependent on foreign purchases of local shares and bonds, which will continue to evaporate if the labour unrest carries on.Analysts warn that strikes in SA are likely to worsen this year — at least in the mining sector, where wage negotiations in the gold and coal industries are due to take place within a couple of months."SA ’s inability to attract capital inflows poses a serious risk to the rand over the medium term, given that the country has a very large current account deficit," Absa Capital currency strategist Michael Keenan says."T...
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