Ina Opperman

By Ina Opperman

Business Journalist


Mining production lowers odds of recession, manufacturing remains weak

While gross domestic product decreased by 0.7% in the third quarter, mining steered clear of a recession.


Mining production for October lowered the odds of a recession in South Africa in the fourth quarter, although it is too early to say given the port congestion and increasing load shedding. Manufacturing output remained weak in October, signalling weak demand and slow growth.

A recession happens when a country’s gross domestic product (GDP) fails to grow for a second consecutive quarter.

According to Statistics SA, seasonally adjusted mining production increased 2.1% in October compared to September and this is especially significant since it declined 0.1% in September compared to August.

Annual output increased 3.9% after the 1.9% contraction in September compared to a year ago. The strong pickup in annual output happened thanks to the favourable base for comparison from the sharp drop in production a year ago, which coincided with a prolonged strike at Transnet at the time.

The largest positive contributors to the year-on-year increase were platinum group minerals (PGMs) that increased 16.9% and contributed 4.0 percentage points, manganese ore that increased by 8.9% and contributed 0.7 percentage points and chromium ore, that increased 13.8% and contributed 0.6 percentage points.

In addition, seasonally adjusted mining production increased 0.7% in the three months ending in October, compared to the preceding three months, driven by increased coal (+3.5%) and PGMs (+2.0%) output.

ALSO READ: Latest manufacturing and mining figures show economic growth slowing down

Mining: mineral sales still less than a year ago

Jee-A van der Linde, senior economist at Oxford Economics Africa, says South Africa’s industrial sector experienced a weak third quarter (-1.1% q/q) and although the latest output numbers are welcomed, mineral sales at current prices were down 0.7% in October compared to October 2022.

“With commodity price tailwinds fading, high input costs and numerous supply-side issues erode mining companies’ profitability. This poses a risk for further layoffs in the mining sector over the coming quarters, after the industry already shed 35 000 jobs in the third quarter, with large mining companies recently accelerating job cuts.”

He says while it looks like the South African economy will avoid a recession in the fourth quarter, growth is expected to remain weak, with the economy forecast to grow by a meagre 0.5% in 2023.

Manufacturing production also increased 2,1% in October to October 2022. The largest positive contributions were made by petroleum, chemical products, rubber and plastic products that increased 7,8% and contributed 1.5 percentage points and motor vehicles, parts and accessories and other transport equipment that increased 6.0% and contributed 0.6 of a percentage point.

ALSO READ: Manufacturing, mining slightly up, business confidence passive

Manufacturing data shows weak demand and subdued activity

However, data from Statistics SA show that seasonally adjusted manufacturing production decreased 0.2% in October compared to September after month-on-month changes of -0.8% in September and 0.5% in August 2023.

Seasonally adjusted manufacturing production decreased 0.7% in the three months ending in October compared to the previous three months, with seven of the 10 manufacturing divisions reporting negative growth rates over this period. 

The food and beverages division was the largest negative contributor, decreasing 3.5% and contributing -0,8 of a percentage point. Seasonally adjusted manufacturing sales decreased 0.7% in October compared to September, after month-on-month changes of -0.1% in September and 2.3% in August.

Seasonally adjusted manufacturing sales increased 3.0% in the three months ending in October compared to the previous three months, with the largest positive contributions from petroleum, chemical products, rubber and plastic products (10.8% and contributing 2.1 percentage points) and motor vehicles, parts and accessories and other transport equipment (8.6% and contributing 1.3 percentage points).

However, Van der Linde says manufacturing output remained stuck in a low gear at the start of the fourth quarter, with seasonally adjusted manufacturing production down 0.2% in October compared to the 0.8% decrease recorded during September.

“The latest factory numbers indicate weak demand and portend subdued economic activity in the fourth quarter. Favourable base effects meant that manufacturing production was up 2.1% year-on-year, after industry was adversely affected by a prolonged strike at Transnet during October 2022.”

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