S.Africa rand drops to 3-1/2 year low as Amplats fires strikers

* Market fears government not in control as strikes spread

* Long-dated bonds hit by long-term inflation worries

By Vuyani Ndaba

JOHANNESBURG, Oct 5 (Reuters) - South Africa's rand tumbledagainst the dollar on Friday to near a 3-1/2 year low and bondsweakened after Anglo American Platinum said it haddismissed around 12,000 workers who went on an illegal strike.

The rand weakened almost 2 percent to 8.6727against the dollar at 1404 GMT, near the 8.71 level last seen inMay 2009, as labour unrest intensified across major industriesin Africa's biggest economy.

"It would appear the news that the 12,000 strikers had beenfired had not been well received by the markets," William VanRijn, a trader at Nedbank, said.

More than 75,000 miners, or 15 percent of the workforce havegone out on wildcat strikes, which were spreading beyond themining sector. A strike by more than 20,000truckers has caused some petrol stations to run dry and delayedproduct deliveries nationwide.

Investors feared the government was not in control of thesituation as selling swept across the foreign exchange and fixedincome markets, with some traders already touting 9.00 randagainst the dollar.

"We've got no leadership in this country to arrest thestrikes. The market is going to make them pay." Ian Scott, aportfolio manager at Stanlib, said.

Government bonds were hit along with the currency, despitehaving made strong gains in the last couple of months ahead oftheir inclusion in Citi's World Government Bond Index, which wasformally sealed on Monday.

Bond yields rose sharply, with yields on the three-year bond

up as much as 13 basis points to 5.45 percent and onthe 2026 bond jumping 17.5 bps to a session high of7.7 percent.

Rand Merchant Bank (RMB) said in a note to clients there wasgrowing evidence that demands for higher wages were spillinginto other industries, driving the long-term trend in inflation.

"Increased inflation uncertainty will be reflected in ahigher inflation risk premium in the long-end of the yieldcurve." RMB said.

(Reporting by Vuyani Ndaba; Editing by Jon Herskovitz and JaneBaird)

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Keywords: MARKETS SAFRICA/RAND