Manufacturing and mining production numbers, which have been subdued in the past few months due to frequent load-shedding, will again be the focus this week.
Stats SA will on Thursday release mining and manufacturing production numbers for March. Both sets of data are expected to show that persistent power cuts continued to weigh heavily on the sectors, which are critical for the country’s economic wellbeing.
Mining output contracted by a bigger-than-expected 5% year on year in February. On a monthly basis, mining production adjusted for seasonal factors fell 4.9% in February, after increasing 3.3% in January.
Miners have also been grappling with rail capacity constraints in moving commodities from mines to ports for export to countries such as China and India. The miners rely heavily on Transnet’s rail network — which has been hobbled by a shortage of locomotives and copper cable theft, among other challenges — to get their minerals to the port.
According to the Minerals Council SA, mining’s contribution to GDP grew 4% to almost R494bn in 2022, for a percentage contribution to GDP of 7.53% versus 7.56% in 2021. But it warned that constrained transport logistics, dire energy supplies and “almost zero net investment” remain a risk to the sector.
In its Facts and Figures Pocketbook 2022, released in February, the Minerals Council estimates the opportunity cost resulting from rail and port constraints to have increased to R50bn in 2022 from R35bn the year before.
Mild recession
Manufacturing output fell 5.2% year on year in February, worse than the 2% drop forecast by economists in a Reuters survey.
Month on month, seasonally adjusted manufacturing production contracted 1.3% in February compared with January, worse than market forecasts. This followed month-on-month growth of 0.5% in January and 0.2% in December.
FNB economists said mining and manufacturing output for February corroborate their view that the economy experienced a mild technical recession. “Both sets of data were against the backdrop of increased uncertainty about global growth to which SA was exposed as a relatively small and open economy.”
The IMF expects global economic growth to come in at 2.8% in 2023, compared with 3.4% in 2022. Growth in advanced economies such as the US is expected to slow to 1.7% from 2.7%.
Growth in China, the world’s second-largest economy and SA’s biggest trading partner, is expected to rebound to 5% in 2023 off a very low base of 3% in 2022 when its economy was marred by lockdown restrictions.
Also to be released on Thursday is data on gold production for March. Gold production increased 1.7% year on year in February, slowing from an upwardly revised 5.2% surge in January.
Data on SA’s gross foreign exchange reserves for April will be released on Monday. The reserves increased to $61.85bn in March, from $61.02bn in February. The increase was driven by a rise in the dollar-denominated gold price and valuation adjustments given the weaker dollar, as well as asset price changes. Offsetting the increase were government-related foreign exchange payments.
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