Data from Statistics SA (StatsSA) yesterday showed that output in the gold mining industry plunged 24.4 percent year-on-year in May from a 19.1 percent contraction in the previous month.
Mining production shrank 1.5 percent during the period, the seventh consecutive decline, compared with the prior year.
FNB economist Jarred Sullivan said gold production subtracted 3.3 percentage points from overall production volumes.
“Interestingly, when excluding gold, mining production increased 2.2 percent year-on-year in May, illustrating the relative importance of the commodity for the overall mining sector,” Sullivan said. “Moreover, this sector has faced numerous challenges, including relatively high extraction costs, labour unrest, electricity supply constraints and policy uncertainty.”
The Minerals Council has said that more than 60 percent of gold mines were marginal or loss-making. On Tuesday, Mineral Resources and Energy Minister Gwede Mantashe said during his budget vote that the mining industry planned a total of 60 mineral resources projects between 2018 and 2020, with an investment estimated value of R110 billion and a projected creation of 32000 jobs.
Mantashe said the projects would involve exploration, expansion, new mines and processing plants which would be resuscitated to capture at least 5percent of the $10bn (R141.02bn) a year global industry.
StatsSA yesterday said that production in diamonds also plunged 30.7 percent in May, shedding 0.7 percent of overall production, while iron ore output declined 5.2 percent, also taking away 0.7 percent in overall volumes.
However, coal production increased 8 percent compared with last year, contributing a solid 2 percent to total production.
Production of platinum group metals also expanded 6.8 percent while manganese ore surged 29.3 percent.
NKC African Economics economist Elize Kruger said with many headwinds still facing the industry, the outlook for the mining sector in the coming months remains clouded. “The local sector has not posted positive year-on-year growth thus far in 2019. Having said that, given the low base created by an exceptionally weak one in the first quarter, a positive quarter-on-quarter growth figure in second quarter is quite likely,” Kruger said.
The mining and quarrying industry fell by 10.8 percent in the first quarter largely as a result of low production of coal, gold, iron ore and chrome ore.
StatsSA said growth in the embattled manufacturing industry slowed to 1 percent year-on-year in May from a 4.3 percent in the previous month.
May’s print was also below market expectations of 1.4 percent increase.
Investec economist Lara Hodes said the modest rise in manufacturing was supported chiefly by a pick-up in the food and beverage division.
“April and May’s readings signal a possible improved performance from the manufacturing sector in the second quarter following first quarter’s dismal outcome, which was underpinned by a domestic environment still evincing weak business confidence,” Hodes said.