Abstract：Currently, Europe is in the midst of an energy crisis due to its recently compromised supply of gas and oil from Russia. South Africa has had to step up their exports of such as coal to aid with the crisis.
Currently, Europe is in the midst of an energy crisis due to its recently compromised supply of gas and oil from Russia. South Africa has had to step up their exports of such as coal to aid with the crisis. The main supplier of this South African fuel is Transnet, and the issue is that the price of transporting coal has recently risen to pre-pandemic levels due to the ongoing strikes in Transnet. These ongoing strikes have greatly impacted the exports of coal to Europe and will surely have an impact on the economy if nothing is done. What does this mean for the rand and how can we traders take advantage of this expected volatility？
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Transnet employees have been on strike for the last two and a half weeks. Like the rest of the country, Transnet employees have experienced rising costs of living yet salaries have remained the same. The strike was the result of a fall in the negotiation between employees and management to change certain work conditions. This ongoing strike is meant to assuage the company to curve to the demands of the employees by threatening a drastic slowdown in production.
This strike could not come at a worse time as Transnet supplies coal to Europe, which is currently experiencing an energy crisis. According to Thungela Resources Chief Financial Officer Deon Smith, Transnet's supply of coal rose to 4 million tons as compared to last year which was at 500000 tons. This shows just how crucial this supply source has become since the Russia Sanctions which prevent the purchase of fuel from Russia, its long-standing supplier for past decades. These recent strikes have significantly reduced the supply of coal to Europe and hence the price of exporting coal has risen considerably.
This is another strike on the South African economy. As we have seen over the past few weeks the Zar has been losing value steadily and is now at the 18.30 level on the USDZAR. We should expect this trend to continue because the countrys GPD is also dependent on exports. Negotiations are set to continue on Wednesday if no resolution s found we should expect the shorting trend the ar is currently on to continue for at least the next few months to come.
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