South Africa’s mining output exhibited a modest growth of 0.3% year-on-year in August, revealing a complex narrative for the industry that is pivotal to the country’s economy.
Despite this increment, economists and sector analysts have remained cautious about the sustainability of this growth, with implications indicating the mining sector will continue to impede gross domestic growth (GDP) expansion for the third quarter of the year.
According to data released by Statistics South Africa (StatsSA) yesterday, key contributors to the mining print in August included manganese ore, which saw a striking increase of 16% while platinum group metals (PGM) production increased by 4.7%.
The robust performance of manganese and PGMs has provided a temporary uplift to the sector.
However, the positivity is somewhat overshadowed by significant downturns in iron ore and gold productivity.
StatsSA said iron ore output plummeted by 15.2%, and gold production declined by 4.6%, even amid elevated bullion prices. Such declines highlight the volatility and challenges that the industry continues to face.
On a month-on-month basis, South Africa experienced a 2.9% increase in mining production in August, following steep declines in previous months, with July recording a drop of 0.8% and June a more significant 1.8%.
Nevertheless, experts warned that despite this month’s gains, the overall trend points towards further contraction.
Hugo Pienaar, chief economist for the Minerals Council South Africa, expressed concern over the sector’s outlook, stating that output could detract despite the positive figures for August.
“Despite the robust increase in overall mining production in August, and even assuming output remains at the higher level in September, mining output is set for a third consecutive quarterly decline,” Pienaar said.
“As in the first and the second quarter of the year, this means that the mining sector will again detract from real GDP growth in the third quarter.”
Sales data also paints a troubling picture, with mineral sales declining by 9.9% year-on-year in August.
Yet, a sharp increase in sales volumes of manganese ore (up 65.1%) and chrome ore (up 28.2%) presents a dichotomy that reflects the uneven recovery within the mining sector.
StatsSA data indicated that seasonally adjusted mineral sales decreased by 20.7% in August compared to July 2024, hinting at ongoing struggles in demand.
Looking beyond immediate fluctuations, Pienaar urged stakeholders to assess mining output trends over a longer timeframe, noting that total real mining production had increased by merely 0.3% year-on-year for the first eight months of 2024.
Compounding the sector’s challenges are historical inefficiencies within the country’s rail and port infrastructure.
FNB senior economist Thanda Sithole underscored that although energy constraints have eased, easing recovery in mining activity was likely to remain moderate due to “a stable yet challenging external demand environment”.
“Ongoing inefficiencies in port and rail infrastructure continue to limit productivity and profitability across the sector,” said Sithole.
South African miners were paying more for lesser volumes through rail, pushing up transport costs for the industry, according to the Minerals Council.
“While factors like electricity and wage growth remain significant contributors to cost pressures, particularly in the energy-intensive mining industry, there are signs of relief in certain areas,” said André Lourens, economist for the Minerals Council earlier this week.
“Transport costs, though still elevated, have shown a slight decrease, and the stronger exchange rate has helped offset some input costs, particularly for imported goods.”
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