SA mining output rises 2.3% year on year in April after 14 consecutive months of decline
South African mining production grew at a higher-than-expected rate year on year in April and halted 14 consecutive months of annual decline. Along with the manufacturing data for April, this points to a decent start to the second quarter (Q2) after the economy narrowly dodged a recession in Q1.
At a growth rate of 2.3%, the number outpaced expectations of a 1.5% expansion, according to a Bloomberg consensus prediction. And it was the first month since January last year that the sector’s production grew on an annual basis.
So it’s good news, but base effects were clearly at play here. In April last year, Sibanye-Stillwater’s gold operations in South Africa were shut down by a strike.
It is therefore no surprise that gold production led the way, rising 27.1% on a year-on-year basis in April. Something similar will no doubt be seen in the May numbers, as the strike only ended in early June last year.
Still, it points to a surprisingly good economic start to Q2 in the face of intensified power cuts and the other hallmarks of South Africa’s failing state.
Last week, data showed that manufacturing production in April rose 3.4% year on year, overshooting a Bloomberg consensus prediction of 2% growth. After the economy narrowly averted a recession in Q1 with growth of 0.4%, this holds some hope that gross domestic product is still expanding.
The data also suggests that the industrial arms of the economy are reducing their reliance on Eskom through self-generation initiatives.
“Despite intense load shedding in April, the monthly increase in output reflects resilience in the sector and, if sustained, could imply increasingly less reliance on the Eskom electricity grid,” Thanda Sithole, FNB Senior Economist, said in a commentary on the data.
On a seasonally adjusted monthly basis, mining production rose 1.8% in April compared with March. It’s also worth noting that April has a spate of public holidays, which makes its performance compared to March really stand out.
None of this means that the mining sector and wider economy are out of the woods yet. It just means that Q2 is off to a better start than expected. Put another way, things are not quite so kak.
“Notwithstanding the annual growth rebound in April, mining output is still down by 2.4% y/y year-to-date (January to April). Still, it reflects significant improvement from the 7.2% y/y contraction recorded over the corresponding period last year. We expect a relatively shallow contraction of 3.2% y/y this year from a 7.3% annual contraction in 2022,” FNB’s Sithole said.
“The envisaged weakness in mining output underscores the constraining impact of hard power shortages, logistics challenges and moderating external demand. A recovery is envisaged beyond 2023 as additional generation capacity reduces load shedding and the external environment becomes favourable.” DM