Mining output positive in fourth quarter despite sharp fall in December

Mining output was positive in the fourth quarter of 2023 despite a sharp decrease of 4.2% in December compared to a 2.7% increase in November. However, the mining sector should still make a positive contribution to overall gross domestic product in the fourth quarter as mining production increased by 2.5% compared to the third quarter.

“The December outturn was weaker than our expectation of an increase of 3.0% compared to a year ago and much lower than the consensus forecast of 4.9%,” Jee-AS van der Linde senior economist at Oxford Economics Africa, says.

The largest positive contributors to the yearly increase were platinum group minerals that increased by 9.4% and contributed 2.8 percentage points, coal, that increased 5.8% and contributed 1.3 percentage points and chromium ore, that increased 19.9% and contributed 0.7 percentage points.

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No meaningful growth in mining industry

Van der Linde says South Africa’s mining industry, from a revenue-generating perspective, has found it more challenging to produce meaningful growth recently.

“Regulatory uncertainty, a lack of reliable electricity supply, logistical infrastructure inefficiencies and theft, among other factors, undermine South Africa’s attractiveness for mining exploration investment.”

During his address at the 2024 African Mining Indaba, president Cyril Ramaphosa highlighted mining’s significance for the domestic economy and acknowledged the shortcomings the industry faces.

He also reiterated what government is going to do to tackle these challenges, as he did the year before. “However, the reality is that the operational performances of Transnet and Eskom that are salient role players in the mining industry, continued to deteriorate over the past year, with the odds of an imminent improvement still slim.”

Even so there was positive movement on the policy front and signs of willingness from government to increase private sector participation in the overall economy, Van der Linde says.

The department of mineral resources and energy’s recent announcement that South Africa’s mining cadastral system will be in place within one year will help clear the huge backlog of mining and exploration applications and could spur fresh foreign investment.

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Mining output and logistics

Moreover, Van der Linde says, government’s Freight Logistics Roadmap clearly outlines increased cooperation between the private sector and the state, which should help boost confidence within the sector by helping miners get their product to and through ports more efficiently.

“That said, it will still be a few quarters before we can expect to see meaningful improvement once conditions have stabilised. Industry fulfils a key role in generating revenue income for the economy and it is an important contributor to job creation.”

Overall mineral sales were down a woeful 10.3% in 2023 compared to the 3.1% increase in annual mineral sales during 2022.

“The latest mining output numbers align with the trend of choppy domestic economic data we have seen throughout 2023, indicative of an economy simply lurching along. Mining is expected to make a positive contribution to overall gross domestic product in the fourth quarter. Our base case remains for the South African economy to avoid a recession in the fourth quarter, but growth is expected to remain weak, growing only by 0.1% in the next quarter, with the economy estimated to have grown by a meagre 0.5% in 2023.”

Meanwhile, he points out, load shedding has shown to still be quite erratic in 2024, which forebodes an uncertain outlook for mining output this year and the economy as a whole.