Mining remains one of the few bright lights in an economy that has not only been dampened by Eskom, but its growth is slowing. On a monthly basis, the sector’s production fell 2.4% in August, after rising 3.2% in July. The July figure has been revised down from 4.1%.
The slowdown in growth is really evident in the years. In August, the mining industry posted 2% year-over-year growth, a number that fell short of expectations. In July the growth was 12.3%, in June 22.9%. In April the annual recovery was 117.4%, but that was a base deep underground as April last year saw the toughest lockout period.
Part of the slowdown is explained by the fact that the mining sector has rebounded faster than most in the past year – a rare example of government, industry and union collaboration. Minister of Natural Resources and Energy, Gwede Mantashe, has been devastated on the political front lately, but he rammed this reopening with strong resistance from the control freaks in the cabinet.
In the three months to the end of August, the industry only managed growth of 0.4% compared to the three months before.
Mineral sales, on the other hand, saw very robust growth of 35.1% year-over-year and 11.5% month-over-month. Platinum Group Metals (PGMs) sales were 55.1% higher than last August. This is due to soaring commodity prices, and while PGMs haven’t hit their highs earlier this year, the price of coal is currently glowing due to the scarcity in China.
Nevertheless, the potential of the sector remains full.
“We remain of the opinion that power disruptions coupled with increased input costs could limit the extent to which mining volumes benefit from the global growth recovery. Port inefficiencies are also not encouraging for the overall export volume of mining, manufacturing and agriculture, ”said Thanda Sithole, senior economist at FNB.
Statistics South Africa (Stats SA) also released production data for August on Tuesday. The sector grew 1.8% year-over-year after declining 4.8% in July when it was hit by the wave of looting and unrest that hit the KZN and Gauteng following the imprisonment of former President Jacob Zuma. haunted. On a monthly basis there was a rebound of 7.6% after a decline of 8.4% in July.
“The latest pressures have been higher than expected, with consensus forecasting a 6% increase over the previous month. Still, manufacturing remains weak as it saw monthly contractions for six months out of eight this year.
“Looking ahead, the sector should have a relatively good month in September according to the latest Absa Purchasing Managers’ Index,” said Pieter du Preez of Oxford Economics Africa in a note on the data.
But taken together, there was probably not enough growth in both sectors to prevent an expected decline in gross domestic product in the third quarter.
And the fourth quarter didn’t get off to a great start. For one thing, load shedding has returned, which could indicate that the economy has picked up some momentum – a dynamic that Eskom is throttling. Then there is the Numsa strike in the steel sector.
And looking to the future, the fourth wave of the pandemic could spoil the party for the ailing tourist, restaurant and alcohol sectors, especially if they should make money in the upcoming summer vacation. This is an economy that just can’t get a break. DM / BM