Slow mining output could add drag to sluggish growth
Delayed June mining data may have skewed second-quarter GDP figures. By Ed Stoddard
The delayed June data shows that mining production for the month rose 19.1% on a year-on-year basis. Annual growth has been slowing since it soared over 117% in April owing to the fact that most mines stopped producing in April last year, the hardest full lockdown month of the Covid-19 pandemic.
The ebb in annual growth since is partly explained by the sector rebooting ahead of most industries last year, so the base effects for comparison have not been rock bottom.
The Department of Mineral Resources and Energy (DMRE) and its capacity challenges have been the subject of much criticism of late, but, in the industry’s eyes, last year’s fast restart to the shafts was a gold star for Energy Minister Gwede Mantashe.
The tardiness in the June data – delivered to Statistics South Africa (Stats SA) the weekend before the release of the second-quarter gross domestic product (GDP) figures on 7 September – meant the numbers were a very rough estimate.
The GDP numbers showed an estimated 1.2% increase in the size of the economy in Q2, with mining output rising 1.9%. Stats SA said the sector contributed 0.1 percentage point to GDP growth.
But figures released on 14 September showed that, for the three months to the end of June, mining output had grown only 0.6%.
“There was a delay in releasing the June numbers ahead of the preliminary Q2 GDP print, but today’s figures show that seasonally adjusted mining production was up 0.6% q/q [quarter on quarter], reflecting that mining indeed contributed positively to GDP, but there is downside risk to the 1.9% q/q currently estimated,” FNB economist Koketso Mano said in a note on the data.
Is this material to the GDP figure? Mike Schussler of Economists.co.za told DM168 it could shave almost 0.1 percentage point off the GDP number, which can be subject to subsequent revision. The mining data is also periodically revised. In July, production growth in the mining sector slowed to 10.3%. On a month-on-month and seasonally adjusted basis, it rose 4.1% after slipping 1.6% in June. At first glance, this suggests that the impact of July’s looting did not knock the sector as hard as others. Seasonally adjusted manufacturing production, for example, decreased 8.0% in July compared with June. Annual growth in mining sales at current prices remains off the charts, thanks to a commodities boom linked to a rebounding global economy. In the year to June, sales soared 94%, slowing to a still brisk growth rate of 32.6% in July.
But the monthly figures cast things in a different light. Compared with June, mining sales declined 11.7% in July – billions of rands – after edging up 0.6% in June.
Several factors may explain the drop in July sales. July’s eruption of social unrest and the Transnet cyberattack disrupted the transport networks that enable the export of minerals and metals.
Commodity prices have also cooled somewhat. Rhodium was fetching almost $30,000 an ounce in March but, in July, that had almost halved at one point to $17,500, according to Johnson Matthey data. Gold prices also dipped significantly in July.
SA’s current account and trade surpluses reached records in the second quarter, mostly on the back of commodity prices. These peaks, however, may not be matched this quarter.
The monthly figures cast things in a different light.
Compared with June, mining sales declined 11.7% in July – billions of rands – after edging up 0.6%