The incessant heavy rains in December slowed down opencast mining activities and contributed to the sector performing below analysts’ expectations for the month.
The sector was forecast to show a 4.9% growth in output, but instead mining production decreased by 1.1% year-on-year in December.
“We believe the biggest impact was from heavy rainfall that slowed down opencast mining activities,” Thanda Sithole, FNB senior economist told Business Day.
Data released by Stats SA on Thursday showed that coal output decreased by 8.1% and gold production dropped by 15.3%.
Other minerals that performed poorly were manganese ore, copper, nickel and iron ore. On the positive side, the mining industry produced more diamonds and platinum group metals in December, with output in both categories increasing by about 25%.
Output by the mining sector contracted by 3.5% for the fourth quarter, which Sithole said would negatively impact GDP growth for the quarter by about 0.2 percentage points.
Average annual growth for mining was roughly in line with FNB’s expectation, but Sithole said that 11.5% growth in output for the year had to be evaluated against the sharp decline in 2020.
The 2021 increase in annual mining production followed a decrease of 10.6% in 2020 and a decline of 1.0% in 2019.
Juan-Pierre Terblanche, principal survey statistician at Stats SA, said the overall rise in 2021 was mostly underpinned by robust growth in PGMs, iron ore and manganese ore.
Despite the overall drop in production, mineral sales increased 10.7% year-on-year in December with the largest positive contribution coming from PGMs, which recorded a 34.4% sales increase, and coal sales which were up 28.8%.
“We maintain our view that domestic mining activity should still benefit from the ongoing recovery in SA’s major trading partner economies, but a slower growth momentum implies that mining output could also moderate,” Sithole said in a statement.
The impact of persistent load-shedding, higher electricity costs and constrained logistics systems continued to pose a risk for domestic production, he said.
December proved less gloomy for the manufacturing sector. According to Stats SA, manufacturing production contracted by 0.1% year-on-year in December — this was better than the market forecast of a 1.4% decline.
The drop in manufacturing production in December was due to a slowdown in output for motor vehicles and parts, and petroleum, chemical, rubber and plastic products.
Stats SA said that output fell by 8% for motor vehicles, parts and accessories and other transport equipment. Petroleum, chemical products, rubber and plastic products fell by 2.3%.
However, production rebounded by 5% for wood, paper, publishing and printing. Electrical machinery also made a positive contribution, increasing by 23.4%.
Overall growth of 6.4% was recorded for the year, but this came off a sharp decline of 12.3% in 2020.
With a growth rebound of 2.5% in the fourth quarter of 2021, the manufacturing sector’s GDP was likely to have contributed 0.3 percentage points to total real GDP growth for the quarter. “This should more than compensate for the 0.2 percentage point negative contribution expected from the mining sector’s GDP,” Sithole said.
The recovery in manufacturing output was likely to continue, but the growth momentum could moderate in 2022, he said.
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