JOHANNESBURG (Bloomberg) -- South Africa’s rand weakened for a second weed after retail sales slumped and Reserve Bank Governor Tito Mboweni said the global recession is putting the country’s economy “in a very difficult situation.”

The rand also fell against the euro after Mboweni said in a speech that the inflation rate will “come down significantly,” indicating the central bank has more room to cut interest rates.
“If growth is slower than expected it would have negative consequences for the rand,” said Jon Harrison, an emerging- markets currency strategist at Dresdner Kleinwort in London. “The rand is a high-beta, emerging-market currency and is likely to suffer more from global risk aversion.” A beta is a measure of volatility.
The rand declined as much as 0.9 percent to 10.2370 per dollar on Saturday and traded at 10.1780 by 5:27 p.m. in Johannesburg, for a 2.3 percent drop since Feb. 13. Against the euro it slipped to 12.874, a depreciation of 0.5 percent this past week.
Retail sales fell for the eighth consecutive month in December, according to a Feb. 18 report, the latest sign that the economy is faltering. The government’s economic growth prediction of 1.2 percent this year, the slowest pace since 1998, “would still be good,” given the global economic slowdown, Mboweni said on Feb. 19. South Africa’s annualized economic growth rate was 0.2 percent in the third quarter.
Technical recession
Government bonds declined this week. The benchmark 13.5 percent security due September 2015 dropped rose five basis points in the week, from 7.98 percent. Yields move inversely to bond prices.
Anglo American Plc, the mining company controlling the world’s biggest platinum producer, Johannesburg-based Anglo Platinum Ltd., suspended dividends and share buybacks yesterday and said it will cut 19,000 jobs to retain cash as metals prices slump. Platinum, South Africa’s biggest export along with gold, lost more than half of its value from a high reached last March.
Anglo Platinum said earlier this month it would cut 10,000 jobs by the end of 2009. Anglo American expects “continuing volatility and weakness in commodity prices,” Chief Executive Officer Cynthia Carroll said in a statement.
The rand slumped to a 2 1/2-week low of 10.2826 per dollar on Feb. 17, after Moody’s Investors Service said banks with units in Eastern Europe may face rating downgrades, prompting investors to pare holdings of emerging-market assets. It also slipped versus 11 of its 16 most-actively traded counterparts this past week as Barclays-owned Absa capital said South Africa may be in a “technical recession.”
South Africa’s economy probably contracted 2 percent in the final quarter of 2008 and shrank 1.6 percent in the first quarter of this year, Monale Ratsoma, a macro strategist at Johannesburg-based Absa, said on Feb. 17. Economic growth for the year will slow to 0.3 percent, he added.