Mining production decreased by a seasonally adjusted 0.9% in the second quarter of 2024, compared with the first quarter.
The largest negative contributors were iron ore and coal, which saw output decreasing by 12% and 2.6%, respectively, Stats SA said on Tuesday.
The decline in output over the quarter could weigh on the GDP growth rate for the period after GDP contracted 0.1% in the first quarter. The SA Reserve Bank predicted growth of 0.6% in the second quarter, but some economists forecast growth of as low as 0.3% based on the unfavourable performance in sectors such as manufacturing and mining.
Gerrit van Rooyen, an economist at Oxford Economics, said that while the latest mining data suggested that the sector would dampen real GDP growth in the second quarter, the decline was probably not enough to drag the economy into a technical recession.
“We forecast that the slight improvement in manufacturing output steered the SA economy to a small expansion of 0.3% in the second quarter. However, if [June’s] retail sales report disappoints, it could tip the scales towards a recession,” he said.
Thanks to a strong performance in April, the manufacturing sector, a larger contributor to GDP than the mining sector, recorded quarterly growth of 0.9% in the second quarter.
According to Stats SA, mining production decreased 3.5% year on year in June, far worse than the consensus predictions of a contraction between 0.1% and 0.8%. Seasonally adjusted mining production decreased 1.6% in June compared with May following month-on-month changes of 0.1% in May and 0.8% in April.
The sector did, however, perform better during the first half of the year than the same six months last year.
“Despite the unexpected weakness at the end of the second quarter, mining production rose marginally by 0.3% in the first half of 2024 compared with the first half of 2023. This aligns with our view of a moderate recovery in the sector’s economic activity,” said FNB senior economist Thanda Sithole.
Easing energy constraints and a stable global growth environment should support activity over the medium term. However, despite some improvements in freight rail, persistent inefficiencies in the ports and rail network continued to constrain productivity and profitability in the sector, Sithole said.
State-owned freight rail operator Transnet continues to struggle to recover from its faltering performance over the past few years.
Kumba Iron Ore, which produces more than half of SA’s iron ore, announced earlier in 2024 that in response to rail challenges, it had revised its production guidance for the years 2024-26 to between 35-million and 37-million tonnes a year, down from the previous figure of 42-million tonnes.
Coal miners have also indicated that they expected a modest, if any, recovery for coal exports via the Richards Bay Coal Terminal (RBCT), which has set a target of 50-million tonnes exported for 2024.
In 2023, Transnet Freight Rail railed 47.9-million tonnes of thermal coal to the RBCT, compared with 50.33-million tonnes in 2022 — a drop of 4.8% and the worst performance since the early 1990s.
According to a report published by the Minerals Council SA earlier this year, real mining GDP declined 0.5% in 2023 and the sector’s contribution to GDP declined from 7.3% in 2022 to 6.3% in 2023. In rand terms the mining sector’s direct GDP contribution fell 8% in 2022 and 2023 to R444bn.
Tuesday’s release by Stats SA showed that mineral sales for the first six months of 2024 were down 0.7% compared with the first half of 2023.
Update: August 13 2024
This story has been updated with additional information.
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