Load shedding puts a damper on mining output

Mining output was down 9% compared to November 2021, and 0.4% compared to October due to load shedding.

According to Statistics SA, the decrease in output was fairly broad-based with notable decreases recorded in platinum group minerals (PGMs), iron ore and diamonds.

Mineral sales also registered a fourth decline in a row in November, with seasonally adjusted mineral sales at current prices measuring 10.4% lower monthly.

Prof Jannie Rossouw, visiting professor at the Wits Business School, says load shedding is definitely responsible for the decrease in mining output and that the full impact will soon be visible across the economy.

The largest negative contributors to the yearly decline were PGMs (-22% and contributing -5.9 ppts), iron ore (-19.4% and contributing -2.1 ppts) and diamonds (-21.5% and contributing -1 ppt).

The decrease in seasonally adjusted mining production in November followed a 3% decline in October compared to September, while the annual output decrease followed a decrease of 11% in October compared to October 2021.

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To be expected

Economic research group Oxford Economics Africa says these decreases were in line with its expectations of a modest improvement, but the contraction was somewhat deeper than the market consensus forecast of a decrease of 6.9% compared to 2021.

November was also the 10th consecutive decline in annual mining production output.

In addition, seasonally adjusted mining production decreased by 1.9% in the three months ending in November 2022 compared to the preceding three months, while mineral sales at current prices were down 9.8% during the same period.

Load shedding likely to hurt GDP

The group says as load shedding occurred sporadically throughout the final months of 2022, a meaningful recovery in output is unlikely.

“In addition, the impact of less favourable commodity prices continues, with mineral sales at current prices dropping to R61.1 billion, 15.2% lower than November 2021.”

While manufacturing recovered lost ground in November, the group says the performance of mining so far in the fourth quarter has been disappointing. This is bad news, as the sector will likely weigh on overall gross domestic product (GDP) growth during the final quarter of 2022.