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CAPE TOWN - Uncertainties over the mining charter weighed on mining production, with figures released yesterday showing that output fell 4.3 percent year-on-year in April following an 8.5 percent fall in the previous month.

Statistics South Africa said mining production had declined a further 2percent month-on-month following a 3.5percent drop in March.

The slowdown in mining takes to three key sectors of the economy that started the second quarter on the back foot after retail sales and manufacturing data both came negative in the month. Retail sales fell by 1.2percent in April, while manufacturing output declined 0.6percent in the month

Policy

NKC African Economic analyst Elize Kruger said ongoing uncertainties relating to government policy as well as the impact of the stronger rand exchange rate (if compared to a year earlier) have taken a toll on the mining sector in recent months

“Following confirmation that the sector had dipped into a recession for the first time since mid-2015, yesterday’s figures signal that the sector remains deeply strained,” Kruger said.

The decline in mining production in the first quarter was a significant contributor to the 2.2percent decline in growth domestic product (GDP) in the second quarter. The mining sector fell 9.9percent during the quarter, extending the 4.4percent drop in the fourth quarter, mainly due to lower production of gold, platinum group metals (PGMs) and iron ore.

The three main negative contributors were PGMs which declined 6.5percent year-on-year, while metallic minerals plunged 36.3percent and diamonds tanked 24.1percent. Gold production shed 5.7percent.

Coal production rebounded in April, increasing 3percent compared to a decline of 2.9percent and non-metallic minerals increased 7.6percent.

FNB senior economic analyst Jason Muscat said persistent uncertainty around potential changes to the yet-to-be-announced mining charter, growing concerns of a global trade war, and relatively weak commodity prices had contributed to the decline.

Extraordinary

“With a third of the sector's 2018 data having already been released, it is going to take an extraordinary turnaround of fortunes for the industry to contribute positively to growth this year,” Muscat said.

All eyes would now be on activity in mining, manufacturing and retail in May and June to see if the country has staved off a technical recession.

Capital Economics economist Yasemin Engin said the poor mining output data spelt trouble for the economy.

“Our GDP tracker, which uses monthly data to create a timely GDP estimate, suggests that growth contracted by 2.5percent quarter on quarter in April,” Engin said.

“This is even worse than the 2.2percent contraction recorded in the first quarter, and suggests a further slowdown in the second quarter if data for May and June also turn out to be weak. This would be the worst performance since the financial crisis."

-BUSINESS REPORT