More Strikes to Strike South Africa

Strikes may seem trivial but they actually have an impact on the economy and trader perceptions. Recently we saw the strikes against Transnet extended way beyond usual and caused considerable losses to the South African economy, we can also expect the same here.

Negotiations between Finance Minister Enoch Godongwana and PSA fell apart on Monday as Enoch only agreed to a 3% increase as mandated in section 5(5) of the Public Service Act, which was not the 10% the PSA requested which is adjusted to suit inflation. Since this negotiation, the Union has promised to commence strikes starting from next week Monday if the government does not bend to their will.

As traders, this is when we need to be on high alert. Public Servants have not struck in over a decade, the initial shock of the sudden drop in working public service employees is bound to cause disruption in economy essential services and hence we should not take this strike likely. This is more likely to have an adverse effect on the rand.

You are going to need a broker who offers a very low fixed spread if you intend to take advantage of the volatility this event is likely to cause. I recommend you use WikIFX to search for such a broker. This app keeps a live feed of all of the smallest spreads currently being applied by the best-regulated brokers. So you can compare the live spreads of brokers next to each other and choose the best one that suits your needs. The app is available on both Android and iPhone so no matter what device you are using you will be able to access their services.

The rand has been on a downfall for the past couple of months as we have been trading past the R18 point in the USDZAR for quite some time now. We should expect this sediment to continue as these upcoming strikes can have a negative effect on the rand. We recommend that around the beginning of the strikes we start to look for more shorting positions for the ZAR. As always, be sure to follow proper risk management as the additional volatility can act as a double edge sword that can blow your account balance.