South Africa’s Mining Sector Rebounds in Second Quarter

Mining activity in South Africa is expected to continue its upward trajectory for the better half of this year after rebounding at the beginning of the second quarter. Data from Statistics South Africa (StatsSA) showed that mining production rose by 0.7% year-on-year in April, recovering from a downwardly revised 4.8% decline in March. This improvement was buoyed by the suspension of load shedding and progress at the ports.

The positive shift in mining could contribute to a boost in the second quarter’s real gross domestic product (GDP) growth, following a 0.1% growth in the first quarter, which was dragged down by mining, manufacturing, and construction sectors.

StatsSA identified platinum group metals (PGMs), chromium ore, and other non-metallic minerals as the largest positive contributors to the mining sector's growth. The World Platinum Investment Council reported a global rise in platinum demand in the first quarter, driven by increased jewelry demand and growth in the automotive sector. However, the sector still faces several challenges.

Despite the overall growth, StatsSA reported that eight of the 12 mineral categories included in the index contracted compared to the same period last year, limiting the extent of April's rebound. Principal survey statistician Juan-Pierre Terblanche noted that production continued to fall for iron ore, manganese ore, gold, and coal. Specifically, gold production dropped by 1.7% year-on-year in April, easing from a 4.3% decrease in March.

“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,” said Terblanche. Manganese ore recorded the largest year-on-year slump, declining by 22.5%, while gold registered its sixth consecutive month of decline.

On a month-on-month basis, season-adjusted mining production improved by 0.8% in April, following a 4.4% decline in March and a 5.2% increase in February.

FNB senior economist Thanda Sithole found the outcome of April's mining data encouraging, despite the limited rebound in mining output at the start of the second quarter. Sithole pointed out that along with the strong manufacturing output growth of 5.2% month-on-month and 5.3% year-on-year in April, this supports FNB’s view that GDP likely rebounded in the second quarter after a mild quarterly decline in the first quarter.

“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,” Sithole said. “This optimism is grounded on expectations of a stable global growth environment and notable improvements in the domestic energy sector.”