The five-month platinum strike continued to depress mining production and sales in May as figures released by Statistics SA yesterday showed platinum group metals (PGMs) recorded the largest declines.
Economists highlighted that the domestic growth aggregate had been weak for a long time, and, along with flatter foreign demand as a result of slower growth in China, would continue to weigh on the mining and manufacturing industries.
Stats SA said overall mining production decreased by 6.5 percent year on year in May. PGM output slumped by a massive 48.5 percent while production of “other” non-metallic minerals slid 13.3 percent.
“The main contributor to the 6.5 percent decrease was PGMs, which contributed minus 10.4 percentage points,” the agency said.
Goolam Ballim, the chief economist at Standard Bank, indicated that even though the rand had weakened, there was limited meaningful activity to stoke an export revival because of the domestic scenario.
He suggested that it was likely that mining performance might succumb to normalised output in the platinum sector, which may bring about positive change in later figures following the conclusion of the worst strike to hit the sector.
He called for greater emphasis to be placed on dealing with electricity constraints in order to curb production losses that might have a negative impact on economic growth.
Annabel Bishop, the chief economist at Investec, said the latest mining data showed a contraction in production. On a three-month rolling average basis (quarter on quarter, seasonally adjusted and annualised) mining production contracted by 20.6 percent, compared with 30 percent in the three months to April and 28.3 percent in the first quarter.
She noted that electricity production was also contracting on a three-month rolling average basis in May.
“In the second quarter, the industrial production data shows a worse outcome than in the first quarter, indicating the quarter could be worse than the 0.6 percent contraction [in gross domestic product] in the first quarter. But much will depend on the June mining, manufacturing and electricity production data to ascertain whether South Africa was in a recession in the first half .”
Bishop added that July was “not an opportune time to raise interest rates in South Africa because even a 25 basis point hike is likely to see significant rand depreciation as foreigners see worsening prospects for growth as a result, and so likely sell some of their holdings of South African equities.”
However, disputing the interpretation of the latest data, Moses Mayekiso, the president of the Workers and Socialist Party, and a former general secretary of the National Union of Metalworkers of SA, said the media was full of experts who, in reality, were just spokespeople for capitalism. (See page 18)
“These experts are all saying the metalworkers strike will cripple the economy and bring ruin to South Africa. It is all nonsense and lies to try to turn people against the strike and against metalworkers and their unions. It is the bosses who are sabotaging the economy.”
Peter Major, a mining analyst at Cadiz Corporate Solutions, said more focus should be placed on figures highlighting performance over six months to a year. He said the Reserve Bank would not make any changes based on the monthly figures.
There could be a different story in the rest of the year as production in the platinum mines was under way, he said, but things would take between two and three months to get into full swing.
Platinum fixed at $1 512 (R16 151) an ounce yesterday afternoon in London, $8 stronger than Wednesday’s second fix. Palladium fixed $7 weaker at $866 an ounce.