Recession Watch — SA mining output soars 6.8% y/y in November, reducing downturn odds
South African mining output grew briskly in November, lowering the odds that the economy fell into a recession in the fourth quarter of last year. But this may not be sustained for long in the face of global headwinds and the Transnet train smash, which will put a handbrake on the coal sector this month.
South Africa’s economy contracted 0.2% in the third quarter (Q3) and the data from the fourth quarter has been mixed, with the jury out on the prospects of another contraction which would equal a recession.
But the industrial arms of the economy have been unexpectedly flexing their muscles. Data released last week showed that manufacturing output rose 1.9% year-on-year in November, a better-than-expected performance.
And now the mining sector has shown new signs of life, with output growing a brisk 6.8% year-on-year in November, Statistics South Africa (Stats SA) said on Thursday.
This was led by a 15.2% surge in platinum group metals (PGMs), which also grew almost 17.0% in October and had a decent performance in September — despite falling prices — reversing a period of decline. In July for example, PGM production fell over 10% year-on-year.
In the three months to the end of November, mining production grew 2.1% compared to the previous three months. If this trend is sustained in December, mining will make a positive contribution to the Q4 gross domestic product (GDP) number.
But it seems doubtful that this growth spurt can be maintained.
For starters, the Transnet train wreckage — not just the figurative one, but a literal one on 14 January — coal export line to Richards — will deal a blow to South African coal exports this month and perhaps beyond, and this in turn may see domestic producers of the fossil fuel curb their production.
Other domestic constraints include signs that labour unrest on the mines is stirring again — there were no less than five wildcat underground sit-ins in Q4 last year — while port snarl-ups are compounding the power and rail crises.
“… current industry fundamentals are not conducive to sustaining an expansion in mining production. Port congestion and load shedding have worsened considerably in recent months, with a key coal export line to Richards Bay shut and export activity mostly suspended after two coal freight trains collided in mid-January,” Jee-A van der Linde, Senior Economist at Oxford Economics Africa, said in a note on the data.
On the external stage, the World Bank is forecasting global economic growth to slow in 2024 for a third year in a row, to 2.4% from 2.6% in 2023. This will undermine demand for South African commodities and other exports.
Still, South Africa may at least dodge a recession, and if that is the case, the mining sector will have done its part. DM