Mineral Resources Minister Gwede Mantashe has moved to allay policy uncertainty in the mining sector. File Photo: IOL

JOHANNESBURG – Mining production in South Africa faltered in the third quarter, sparking fears that the country could struggle to lift out of the current technical recession.

Data from Statistics South Africa (StatsSA) yesterday showed that the sector continued to stagnate, falling 1.8 percent year on year in September following a 6.7 percent decline in August.

StatsSA said output in the gold sector plunged 19 percent during the period, recording its biggest decline in almost three years. 

NKC African Economics analyst Elize Kruger said the data proved that the mining sector would have been a negative contributor to third-quarter gross domestic product (GDP) growth. 

Kruger said mining production declined 2.2 percent during the period compared to the second quarter.

She said ongoing concerns regarding US import tariffs on the steel and aluminium sectors, high electricity prices, hefty wage demands and labour protests in the gold sector would continue to hamper growth in the coming months. 

“On top of the local headwinds, there is a growing sense that global trade developments could harm the global economy in due course,” Kruger said, “while the expectation of a general moderation in global growth in 2019 could also depress commodity prices.”

Mining was a positive contributor to second-quarter gross domestic product (GDP), up 4.9 percent, staging a recovery after two consecutive quarters of decline.  

The economy as a whole declined 0.7 percent during the period following a 2.6 percent contraction in the first quarter.

However, Mineral Resources Minister Gwede Mantashe has moved to allay policy uncertainty in the sector, drafting a new mining charter that was broadly welcomed by the sector, while he also proposed to withdraw the controversial Mineral and Petroleum Resources Development Amendment Bill.

FNB senior economist Jason Muscat said he expected the mining industry to struggle in the near future as global growth slows.

“The print is negative for the sector's contribution to GDP growth in the third quarter, which is likely to fall by approximately -5 percent quarter-on-quarter and shave -0.5 percentage points from the headline number,” Muscat said.

StatsSA said manufacturing production inched up 0.1 percent on a yearly basis in September to end two successive quarters of decline.

Manufacturing activity slowed 1.5 percent gain in August as the industry continued to shed jobs at an alarming rate, letting go 25 000 people in the third quarter alone.  

StatsSA said manufacturing was expected to contribute positively in the third-quarter GDP.

However, it said the Septembers print was the lowest annual gain in industrial output since a 1.8 percent drop in March. 

Economist at Capital Economics Gabriella Dickens said the two sets of data showed that the economy might have pulled out of recession in the quarter, but that growth was very weak.

The National Treasury and the SA Reserve Bank have already slashed this year's growth forecast to 0.7 percent, way below the 1.5 percent the Treasury had forecast in February.