Thanda Sithole | Stats SA's latest Mining and Manufacturing data analysis

Total mining production, not seasonally adjusted, remained flat (0%) in May compared to the same month last year, falling short of Reuters’ consensus prediction of a 0.7% y/y increase. Seasonally adjusted output fell by 0.6% m/m, partially reversing the 0.8% expansion recorded in April. For the three months ending in May, output was down by 0.8%.

This suggests that the mining sector’s gross value added could, depending on the June data print, again drag GDP growth in 2Q24. This clouds our expectations for a GDP growth rebound following the 0.1% contraction in 1Q24.The weakness in mining output persists despite easing energy constraints, with the country having observed over a hundred days without load-shedding. This suggests that a combination of negative factors, including a stable yet unsupportive external environment and low commodity prices on average, may be at play.

Outlook

Year-to-date mining output growth of 0.9% is comparatively better than the -0.3% average for 2023, supporting our view of a moderate recovery in mining output this year. Activity should increase further over the medium term as energy supply constraints ease and global demand for commodities improves. Despite some improvements in freight rail, persistent inefficiencies in the ports and rail network continue to constrain the sector’s productivity and profitability. However, ongoing logistics reforms should lift productivity over time.

Selected sector analysis

The performance of various divisions was mixed, with six divisions posting positive annual growth and the other six posting negative growth.

• Coal output increased by 7.0% after declining by 2.0% in April.
• Iron ore output experienced a 2.5% increase following a 7.4% contraction in April.
• Manganese ore expanded by 3.5% after declining by 19.8%.
• Diamonds increased by 11.2% after a 6.8% increase.
• Chromium ore output increased by 17.1%, reflecting average growth of 15.2% since September 2023.
• Other non-metallic minerals experienced a 6.8% expansion, after a 17.5% increase.

Negative growth:

• Platinum Group Metals contracted by 4.1% after a 16.7% increase in April.
• Gold output was down by 9.0%, marking the seventh successive month of contraction.
• Nickel output contracted by 3.6% after a 3.5% decline.
• Copper output was down by 12.1% following a 1.7% decrease.
• Other metallic minerals output declined by 17.6%, worse than the 22.3% decline in April.
• Building materials output declined by 4.9% following a 0.6% expansion in April.

*Thanda Sithole is Senior Economist at FNB.