Mining output shrinks faster

Mining production contracted at a faster pace in November, signalling that it may contribute to negative fourth-quarter economic growth. The release of the sombre mining statistics comes as the World Bank forecasts a modest recovery for SA in the next two years from a low growth of 0.4% it expects for 2016.

Mining production contracted at a faster pace in November, signalling that it may contribute to negative fourth-quarter economic growth.

The release of the sombre mining statistics comes as the World Bank forecasts a modest recovery for SA over the next two years from the low growth of 0.4% it expects for 2016.

Output dropped in nine of the 12 mineral groups, with the largest declines in platinum group metals, iron ore and gold mineral groups, which account for more than half of total mining production.

The seasonally adjusted three-month rolling measure showed a decline in production of 1.5%, indicating that the sector may not help boost the GDP outcome for the fourth quarter.

The manufacturing sector output, by comparison, grew 1.9% between November and October, but on a three-month measure fell 1.1%, indicating that this sector was also unlikely to make a positive contribution.

Investec economist Kamilla Kaplan said: “Seasonally adjusted [mining] production would have to rise by over 9% month on month in December for the three-month rolling measure to turn positive for the fourth quarter.”

Mining production had declined 5.2% year on year in October 2016, compared with growth of 4.3% year on year in 2015.

In 2017, the sector faces the risk of the implementation of restrictive trade agreements, which would affect global growth recovery and China’s demand for commodities.

China is SA’s single largest export destination by country and accounts for 15% of SA’s commodity exports, Kaplan said.

Nedbank economists, however, expect mining production to improve with the forecast lift in commodity prices.

“However, global demand, while expected to be marginally firmer this year, is still subdued and conditions in the domestic mining sector remain challenging, limiting the performance of mining production.”

Marek Hanusch, World Bank senior economist for SA, said on Tuesday that a “modest and fragile” recovery in growth was expected for the country “unless private sector investment accelerates”.

The World Bank estimates SA’s economy to have expanded 0.4% in 2016 and 1.1% in 2017 and 1.8% in 2018. On Tuesday, the IMF projected growth of 0.3% in 2016, 0.8% in 2017 and 1.6% in 2018.