SA’s year-on-year mining and manufacturing production increased, contributing positively to growth, but analysts are concerned persistent load-shedding, higher electricity costs, constrained logistics systems and the conflict between Russia and Ukraine will hinder output.
Mining is a significant sector of the economy, contributing about 7% to national GDP. It is one of the economy’s highest foreign currency earners and is a key employer in the country.
Nedbank economist Candice Reddy said mining companies will continue to benefit from elevated prices for as long as the markets are unsettled by the war.
“If the rand were to come under renewed and sustained pressure from a spike in risk aversion caused by some combination of war and tighter US monetary policy, it would provide an additional boost to the sector’s profitability,” said Reddy.
Stats SA released its mining production figures on Thursday, which showed an increase of 0.1% year on year in January. Mining production rose by 5.4% in January compared to that of December. This is the biggest monthly jump in production since July 2020. The January posting follows month-on-month declines of 5.5% in December and 3.3% in November.
Stats SA said manganese ore and gold were the largest contributors to growth, with manganese ore production increasing 19.6% and contributing 1.9 percentage points to growth.
Gold production increased 7% year on year in January 2022, ending four consecutive months of falling output. Gold contributed 0.8 of a percentage point to growth, according to Stats SA data.
On the downside, iron ore production was the biggest drag on growth, falling by 13.4%, contributing -1.5 percentage points. Copper, nickel, platinum group metals and coal also performed poorly, with nickel recording its ninth consecutive month of year-on-year decline. It fell by 25.6% on a month-on-month basis.
SA’s mineral sales at current prices decreased 8.2% in January 2022 after recording 18 months of positive year-on-year growth.
Meanwhile, manufacturing production increased 2.9% in January 2022 compared with the same month in 2021, with six of 10 manufacturing divisions recording a rise in output.
SA’s manufacturing sector contributed 13% to GDP and almost 50% to total export earnings in 2020.
The food and beverages division was the largest positive contributor to overall growth, increasing by 11.5% and adding 2.5 percentage points. This was primarily driven by the production of beverages. Another positive addition to growth was the wood and wood products, paper, publishing and printing division, which increased 6.8% and contributed 0.7 of a percentage point.
Manufacturing sales increased 4.7% in January 2022 compared with December 2021. Stats SA said this followed month-on-month changes of 1.1% in December 2021 and 8.8% in November 2021.
Quarter-on-quarter manufacturing sales increased 8.1% in the three months ended January 2022 compared with the previous quarter.
Bureau of Economic Research chief economist Hugo Pienaar said some downward risk would emanate from a general slowdown in the global economic recovery, persistent load-shedding and potential labour disputes. He said gold mining output is also set to be under pressure in the near term after several unions at Sibanye-Stillwater voted to go on strike at the company’s domestic gold mining operations.
FNB chief economist Mamello Matikinca told Business Day SA’s manufacturing output recovery is still largely incomplete — held hostage to the global shortage of key input components, load-shedding and the July social unrest.
“As a result, manufacturing output is still down by 6.7% compared to 2019 average levels. We expect the recovery in manufacturing output to continue, supported by domestic and external demand, but the growth momentum will likely moderate in 2022 — worsened by current geopolitical tensions,” she said.
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