Fal­ter­ing mine sec­tor pro­duc­tion sparks re­ces­sion fears

Cape Times - - BUSINESS REPORT - KA­BELO KHU­MALO ka­belo.khu­malo@inl.co.za

MIN­ING pro­duc­tion in South Africa fal­tered in the third quar­ter, spark­ing fears that the coun­try could strug­gle to lift out of the cur­rent tech­ni­cal re­ces­sion.

Data from Statis­tics South Africa (Stat­sSA) yes­ter­day showed that the sec­tor con­tin­ued to stag­nate, fall­ing 1.8 per­cent year-on-year in Septem­ber fol­low­ing a 6.7 per­cent de­cline in Au­gust.

Stat­sSA said out­put in the gold sec­tor plunged 19 per­cent dur­ing the pe­riod, record­ing its big­gest de­cline in al­most three years.

NKC African Eco­nom­ics an­a­lyst El­ize Kruger said the data proved that the min­ing sec­tor would have been a neg­a­tive con­trib­u­tor to third-quar­ter gross do­mes­tic prod­uct (GDP) growth.

Kruger said min­ing pro­duc­tion de­clined 2.2 per­cent dur­ing the pe­riod com­pared to the sec­ond quar­ter.

She said on­go­ing con­cerns re­gard­ing US im­port tar­iffs on the steel and alu­minium sec­tors, high elec­tric­ity prices, hefty wage de­mands and labour protests in the gold sec­tor would con­tinue to ham­per growth in the com­ing months.

“On top of the lo­cal head­winds, there is a grow­ing sense that global trade de­vel­op­ments could harm the global econ­omy in due course,” Kruger said, “while the ex­pec­ta­tion of a gen­eral mod­er­a­tion in global growth in 2019 could also de­press com­mod­ity prices.”

Min­ing was a pos­i­tive con­trib­u­tor to sec­ond-quar­ter GDP, up 4.9 per­cent, stag­ing a re­cov­ery af­ter two con­sec­u­tive quar­ters of de­cline.

The econ­omy as a whole de­clined 0.7 per­cent dur­ing the pe­riod fol­low­ing a 2.6 per­cent con­trac­tion in the first quar­ter.

How­ever, Min­eral Re­sources Min­is­ter Gwede Man­tashe has moved to al­lay pol­icy un­cer­tainty in the sec­tor, draft­ing a new min­ing char­ter that was broadly wel­comed by the sec­tor, while he also pro­posed to with­draw the con­tro­ver­sial Min­eral and Petroleum Re­sources De­vel­op­ment Amend­ment Bill.

FNB se­nior econ­o­mist Ja­son Muscat said he ex­pected the min­ing in­dus­try to strug­gle in the near fu­ture as global growth slows.

“The print is neg­a­tive for the sec­tor’s con­tri­bu­tion to GDP growth in the third quar­ter, which is likely to fall by ap­prox­i­mately -5 per­cent quar­ter-on-quar­ter and shave -0.5 per­cent­age points from the head­line num­ber,” Muscat said.

Stat­sSA said man­u­fac­tur­ing pro­duc­tion inched up 0.1 per­cent on a yearly ba­sis in Septem­ber to end two suc­ces­sive quar­ters of de­cline.

Man­u­fac­tur­ing ac­tiv­ity slowed 1.5 per­cent gain in Au­gust as the in­dus­try con­tin­ued to shed jobs at an alarm­ing rate, let­ting go 25 000 peo­ple in the third quar­ter alone.

Stats SA said man­u­fac­tur­ing was ex­pected to con­tribute pos­i­tively in the third-quar­ter GDP.

How­ever, it said the Septem­bers print was the low­est an­nual gain in in­dus­trial out­put since a 1.8 per­cent drop in March.

Econ­o­mist at Cap­i­tal Eco­nom­ics Gabriella Dick­ens said the two sets of data showed that the econ­omy might have pulled out of re­ces­sion in the quar­ter, but that growth was very weak.

The Na­tional Trea­sury and the South African Re­serve Bank have al­ready slashed this year’s growth fore­cast to 0.7 per­cent, way be­low the 1.5 per­cent the Trea­sury had fore­cast in Fe­bru­ary.

STATS SA says gold sec­tor out­put plunged 19 per­cent in the third quar­ter. | BLOOMBERG

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