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ECONOMIC OUTLOOK

SA mining production tanks 10.4% in year to October, the latest sign of a terminal decline

South African mining production fell on an annual basis for the eighth consecutive month in October, the latest signal that the sector is in the throes of a terminal long-term decline.
SA mining production tanks 10.4% in year to October, the latest sign of a terminal decline Underground workers operate drilling machinery at the Gold Fields South Deep gold mine in Westonaria, South Africa, on 12 October 2022. (Photo: Michele Spatari / Bloomberg via Getty Images)
Ed Stoddard
By Ed Stoddard
13 Dec 2022
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South African mining production fell on an annual basis by 10.4% in the year to October, Statistics South Africa data showed on Tuesday. This was a much larger decrease than the Bloomberg consensus forecast of a 5.5% contraction. The last time the sector recorded annual growth was in January, when production rose around 1%, making this the eighth consecutive month of annual decline. 

Platinum group metals production tanked 32.5% in the year to October, a trend which made the largest negative contribution to the data. On a monthly basis, production was down 2.5% compared with September, while output was flat in the three months to the end of October compared with the previous three months.  

“Domestically, persistent, heightened load shedding continues to weigh heavily on the energy intensive mining sector and remains a key downside risk to the country’s growth potential,” Investec economist Lara Hodes said in a note on the data. 

The sector, which for years has been in a state of long-term decline – South Africa was once by far the world’s top gold producer and is now barely in the top 10 – faces many challenges which go beyond the geological ones of deeper mines and declining grades. 

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Aside from power constraints, the sector’s potential is bottled up by Transnet’s ongoing woes, which included an eight-day wage strike in October. 

The industry also has to contend with mounting social unrest often ginned up by shadowy “procurement mafias”, while government policy remains as clear as a lump of coal.

After the economy surprised with a 1.6% expansion in the third quarter (Q3), the data also point to a poor start to Q4. Data unveiled last week showed manufacturing production only rose 1% in the year to October, well below expectations of a 5.6% increase and a marked slowdown from 2.9% growth in September. 

Retail trade sales data for October – due out on Wednesday – will provide further signals to the economy’s start to Q4, but is also likely to be bleak in the face of inflation and rising interest rates. 

The South African Chamber of Commerce and Industry Business Confidence Index rose a marginal 1.4 points to 110.9 in November, which is at least a green shoot. But amid rolling power blackouts in December as the economy and businesses slow down for the annual Christmas break, the outlook can only be described as grim. 

Throw in a slowing global economy and the political uncertainties around the ANC’s elective conference, and the outlook goes from extremely bad to worse. DM/BM

Comments

Jane Crankshaw Dec 14, 2022, 07:40 AM

In my opinion, the foundation of this decline can be laid at the door of the ANC’s red tape, corruption and ineptitude, racist BEE policies that have led to political instability and our membership of BRICS which has singled us out as unreliable. In the good old days, we were confident enough to control “supply and demand” by stockpiling resources until the market was prepared to pay any price - rather like what the Saudis are currently doing with Oil …those days are long gone as our reputation as reliable players has tanked. It’s a great pity especially for the jobs that are on the line and exacerbated by the arrival of the “ resources mafia” Talk about a “cluster f…!” All thanks to the ANC.

John Counihan Dec 14, 2022, 11:58 AM

Wow, yet another sector ruined by the ANC. And such a huge one! So, Eskom wrecked by ANC + Transnet wrecked by ANC + procurement mafias spawned by ANC = wrecked mining industry. No amount of adding jobs here and there, in this corner and that one, will compensate for the unemployment implications of wrecking the mining industry. The sector may be in decline, but it's still a huge employer. And that idiot Mantashe has the temerity to accuse the high-integrity, highly- skilled Eskom execs of attempting to bring down the State? The ANC is doing that itself by just existing in its present derelict state. So sad!

Rob Wilson Dec 15, 2022, 05:45 PM

Mining has always been a cyclical business, but we developed world class skills (many who are now working elsewhere) over a period of 100 years to deal with the financial and technical challenges. But mining cannot deal with collapse of the power supply, the shipping or with the scale of corruption being thrown at it. Quo vadis. Ask the ANC for jobs.

christo o Dec 16, 2022, 08:09 AM

I recall some analysis I did for a client about 8 years ago, which predicted a decline in the gold mining industry not because of anything political or Eskom related, but because the easily extractable resources have been depleted, and mining gold was becoming more expensive (i.e. the marginal extraction costs become too high to do so profitably). So I would like to see a technical analysis that talks about the access to reserves and the cost of extraction against the trends in commodity markets in support of this article. It is sensationalist and uninformative to just report statistics without any context.