Stats SA’s latest GDP data brought a wave of relief to the mining sector after soaring precious metal prices saw miners driving the country’s economic growth in the second quarter.
Following a 4.1% contraction in the first three months of the year, SA’s mining GDP jumped 3.7% quarter on quarter in the three months to end-June, contributing 0.2% points to the economy's 0.8% real GDP growth.
The second quarter rebound may help restore faith in the local mining sector as input cost inflation, trade wars and logistics bottlenecks continue to threaten its export potential with the strong showing likely to buoy sentiment among foreign investors.
The data comes as industry players are urgently trying to arrest a decline in foreign investment after capital expenditure in the mining sector plunged by 9.6% last year, with the Minerals Council calling 2024's fixed investment data a “horror show”.
"While mining registered positive growth, structural constraints affecting the sector remain. Although highly endowed in minerals of all sorts, SA continues to struggle to attract investment into new mines," Minerals Council SA acting chief economist Bongani Motsa said on the latest data.
The sector’s outperformance was driven primarily by soaring gold and platinum group metal (PGM) prices which helped shelter it from geopolitical uncertainty weighing on other areas of the economy.
Minerals Council data shows that SA mining production rose 3.9% in the second quarter, a notable improvement in output over the previous quarter, as PGM production jumped 9% and gold production climbed 4.7% from the first three months.
Gold miners were supported by a 5.73% uptick in gold prices during the period. Geopolitical uncertainty stemming from war in Europe and the Middle East, and US tariffs, has fuelled the risk-off sentiment supporting the metal’s rally.
SA PGM miners also enjoyed a price rally during the three months to end-June, with platinum prices surging more than 36% during the quarter as SA’s shrinking supply of the metal and the growing demand for hybrid electric vehicles worked its way into the market.
Thanks to their strategic significance, precious metals were also among the few SA exports excluded from US “liberation day” tariffs, giving the local mining sector some protection from the two countries’ deteriorating trade relationship.
Mining production data published by the Minerals Council on Thursday shows that the industry entered the third quarter on a strong footing, with production rising 4.4% and sales up 2.2% year on year in July.
The primary contributor to July’s reading was again PGMs, where production climbed 1.7% and sales jumped nearly 25% thanks to the metal’s ongoing price rally.
Further support came from iron ore miners, which posted a 12.2% jump in production and 20% sales growth as iron ore prices steadily recovered from US tariff shocks.
On a seasonally adjusted, month on month basis, mining production increased for a fifth consecutive month having gained 2.4% in June.
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