Manufacturing and min­ing sec­tors could ease re­ces­sion in SA

Min­ing pro­duc­tion is up by 0.6% in the sec­ond quar­ter, while manufacturing in­creased by 1.5%, lat­est fig­ures show.

The Star Early Edition - - NEWS - Ka­belo Khu­malo

FIG­URES re­leased yes­ter­day by Statis­tic­sSA showed that South Africa’s min­ing and manufacturing out­put in the sec­ond quar­ter of this year was likely to help the econ­omy out of the tech­ni­cal re­ces­sion it cur­rently finds it­self in.

Min­ing fig­ures showed that while pro­duc­tion fell by 0.8 per­cent year-on-year in June, on a quar­terly ba­sis pro­duc­tion in the sec­tor in­creased by 0.6 per­cent in the sec­ond quar­ter, com­pared with the first quar­ter.

Man­ganese ore was the largest pos­i­tive con­trib­u­tor in min­ing pro­duc­tion in the quar­ter af­ter it ticked up 1.1 per­cent.

Kamilla Ka­plan, an econ­o­mist at In­vestec, said min­ing pro­duc­tion was ex­pected to make a pos­i­tive con­tri­bu­tion to the sec­ond quar­ter’s gross do­mes­tic prod­uct (GDP).

“The mag­ni­tude of the re­bound in com­mod­ity prices seen in the sec­ond half of last year has faded some­what, while oper­at­ing cost pres­sures for min­ing pro­duc­ers re­main el­e­vated.

“This will likely tem­per the ex­tent of re­cov­ery in the min­ing sec­tor pro­duc­tion this year – from a 4.3 per­cent de­cline last year.”

The chal­leng­ing broader eco­nomic growth back­drop, cou­pled with per­sis­tent reg­u­la­tory and pol­icy un­cer­tainty linked to the re­vised Min­ing Char­ter, would con­tinue to dampen busi­ness sen­ti­ment in the min­ing sec­tor and both the fixed-cap­i­tal ex­pen­di­ture and em­ploy­ment growth in the in­dus­try,” Ka­plan pointed out.

Ear­lier this month, SA Re­serve Bank gover­nor Le­setja Kganyago warned that the coun­try’s eco­nomic re­ces­sion could deepen, un­less there was pol­icy cer­tainty on min­ing and agri­cul­ture, the two sec­tors that con­trib­uted to growth in the first quar­ter.

Manufacturing pro­duc­tion in­creased by 1.5 per­cent in the sec­ond quar­ter of 2017, com­pared with the first quar­ter of the year, while six of the manufacturing di­vi­sions re­ported pos­i­tive growth rates dur­ing this pe­riod.

The largest con­trib­u­tors were the food and bev­er­ages di­vi­sion, which surged 4.1 per­cent in the quar­ter, and mo­tor ve­hi­cles, parts and ac­ces­sories as well as the trans­port equip­ment di­vi­sion, which saw a 3.7 per­cent in­crease in the pe­riod.

But on a year-on-year ba­sis, manufacturing pro­duc­tion de­creased by 2.3 per­cent in June this year, com­pared with the prior pe­riod.

The largest neg­a­tive con­tri­bu­tions to pro­duc­tion were re­ported in the pe­tro­leum, chem­i­cal prod­ucts, rub­ber and plas­tic prod­ucts, which de­clined by 10.6 per­cent.

To­gether, min­ing and manufacturing make up about 20 per­cent of the coun­try’s GDP.

John Ash­bourne, an Africa econ­o­mist at Cap­i­tal Eco­nom­ics, said South Africa’s min­ing and manufacturing sec­tors both con­trib­uted pos­i­tively to head­line growth in the last quar­ter and if re­tail sales fig­ures ex­pected next week picked up, then GDP would re­bound faster than was ex­pected dur­ing the sec­ond quar­ter.

“The re­cent wors­en­ing per­for­mance of the sec­tor was due to a fall in the pro­duc­tion of plat­inum group me­tals. Strong iron ore out­put helped to coun­ter­bal­ance this in April and May, but the de­te­ri­o­ra­tion in this sub-sec­tor’s per­for­mance pushed over­all out­put into neg­a­tive ter­ri­tory in June.

“Growth in the sea­son­ally ad­justed quar­ter-to-quar­ter rate that aligns with the GDP also slowed, but re­mained pos­i­tive at 0.6 per­cent.

“Much de­pends on the per­for­mance of the cru­cial re­tail sec­tor. The sur­prise GDP con­trac­tion in the first quar­ter was largely due to the poor per­for­mance of con­sumer spend­ing, which had tra­di­tion­ally been one of the econ­omy’s few re­li­able sources of growth,” Ash­bourne pointed out.

PHOTO: SUP­PLIED

Min­ing out­put has shown a 0.6 per­cent sec­ond quar­ter up-tick.

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