Mining sector’s surprise performance points to strong industry

A surprisingly strong performance by the mining industry in August augurs well for the third quarter’s GDP performance.

Mining production rose a significant 6.9% year on year in August, having expanded 0.9% year on year in June.

Chamber of Mines economist Henk Langenhoven said: “There’s so much talk about the commodity price improvement and whether it would last. It has lasted for a while and the exchange rate has stayed stable, which has led to the improvement despite economists’ expectations for it to drop.”

Capital Economics economist John Ashbourne said figures suggested that the sector remained strong.

“This marked the sector’s strongest growth since March. The gold, iron, and diamond sectors made the largest contributions to growth. But output rose across almost the entire mining industry,” he said.

According to FNB senior economic analyst Jason Muscat: “While the global environment remains supportive of both commodity prices and output, the August print far exceeded our expectations, and puts the sector on course to make a significant positive contribution to this quarter GDP.”

However, he warned that the domestic environment remained uncertain “with regard to policy and the relationship between the industry and the mining ministry”.

Nedbank economist Busisiwe Radebe said: “It’s off a low base from last year, so you expect mining to rebound. There are, however, roadblocks that will take the shine off mining production slightly. There’s uncertainty on policy, which has made the sector business unfriendly. It’s a difficult operating environment.”

Last week, Chamber of Mines CEO Roger Baxter said the chamber would proceed with its court challenges against the Department of Mineral Resources, saying that the legal route was the only avenue in which it had confidence when dealing with the regulator and Mineral Resources Minister Mosebenzi Zwane.

Chamber of Mines President Mxolisi Mgojo said: “Mining is the flywheel of the South African economy. When mining does well, it lifts many other sectors, those who supply inputs into the industry, and through the significant export revenue it brings back into the economy.

“The converse is also true – when mining struggles, most other economic sectors also feel the pain.”

Figures released on Tuesday showed manufacturing to have also recorded a surprisingly strong performance in August, increasing substantially 1.5% year on year following four months of contraction.