Mining activity in South Africa showed a promising resurgence at the start of the second quarter, thanks to the suspension of load shedding and improvements at the ports.
Mining Production Sees Growth
Data released by Statistics South Africa (StatsSA) revealed that mining production rose by 0.7% year-on-year in April. This is a significant improvement from the 4.8% decline recorded in March. The positive trend in mining could also bolster the second quarter’s real GDP growth, especially after the sector, along with manufacturing and construction, dragged growth to a mere 0.1% in the first quarter.
Key Contributors to Growth
Platinum Group Metals (PGMs)
Chromium Ore
Other Non-Metallic Minerals
The World Platinum Investment Council noted a rise in global platinum demand during the first quarter, driven by increased jewellery demand and growth in the automotive sector. Despite this, the sector continues to face several challenges.
Mixed Performance Across Minerals
However, StatsSA reported that eight of the twelve mineral categories included in the index saw contractions compared to the same period last year, which limited the overall lift in April’s figures.
Iron Ore, Manganese Ore, Gold, and Coal: Production continued to fall in these categories.
Gold Production: Dropped by 1.7% year-on-year in April, following a 4.3% decrease in March.
StatsSA’s principal survey statistician, Juan-Pierre Terblanche, highlighted that, “The production of platinum group metals drove much of the upward momentum, increasing by 16.9%. All other minerals performed poorly, negatively affecting overall growth.”
Manganese Ore: Recorded the largest year-on-year decline at 22.5%.
Gold: Registered its sixth consecutive month of decline, down by 1.7% year-on-year.
Month-on-Month Improvements
Season-adjusted mining production improved by 0.8% in April compared with March, following a 4.4% decline in March and a 5.2% increase in February.
Economist Insights
FNB senior economist Thanda Sithole described April’s mining output as encouraging despite the limited rebound. He noted that strong manufacturing output growth of 5.2% month-on-month and 5.3% year-on-year in April supports the view that GDP likely rebounded in the second quarter after a mild decline in the first quarter.
Year-to-Date Growth: “Mining output is up by 0.6% year-to-date, and we remain cautiously optimistic about positive growth this year after the sector experienced annual contraction in the past two years,” said Sithole.
Factors Influencing Optimism: Expectations of stable global growth and improvements in the domestic energy sector, despite ongoing inefficiencies in ports and rail networks, contribute to this outlook.
In the three months ended April, StatsSA reported a slight rebound in seasonally adjusted mining production to 0.1% compared with the previous three months.
Addressing Structural Challenges
Investec economist Lara Hodes emphasized the need for the government to tackle the bottlenecks hampering the mining sector’s contribution to the economy.
Energy and Infrastructure: “Domestically, the energy-intensive mining sector likely benefited from a suspension in rotational load shedding during the month. However, it continues to face other structural challenges, including fragile water supply infrastructure due to lack of maintenance,” Hodes stated.
Logistical Issues: Despite progress in easing port congestion, South Africa’s logistical challenges continue to impact mining activity and export potential.
In summary, while the suspension of load shedding and improvements at ports have provided a much-needed boost to South Africa’s mining sector, significant challenges remain. Addressing these issues is crucial for the sector to sustain its growth and contribute optimally to the economy.
