‘The route is a salient export channel for South African minerals, namely coal and chrome.’
South Africa’s mining industry continues to experience a decline in productivity month-on-month, mainly due to logistical constraints.
The industry’s mining output volumes contracted by 0.2% month-on-month in November 2024, however, this is an improvement compared to October’s 2.8% decline.
Jee-A van der Linde, senior economist at Oxford Economics Africa says the absence of load shedding has contributed positively to the 0.6% year-to-date increase in total production, however, logistical constraints continue to restrain growth.
Mining production dips
“Seasonally adjusted mining production dipped by 0.2% month-on-month in November 2024, following the 2.8% month-on-month contraction recorded in October.
“Annual output was down by 0.9% in November, following the previous month’s 1.1% year-on-year increase.
Seasonally adjusted mining production was up by 4.0% during the three months ending November compared with the preceding three-month period.
Van der Linde adds that quarterly growth in quarter four of 2024 is anticipated to be lower, with the mining sector expected to make a modest positive contribution to overall economic growth.
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Mozambique unrest partially blamed for the decline
He says that logistical constraints remain a thorn in the industry’s side. The challenge was worsened by the post-election unrest in Mozambique, which led to the temporary closure of the Lebombo border crossing.
“The route is a salient export channel for South African minerals, namely coal and chrome.”
Miners had to reroute a portion of their mineral movements through Maputo, at a time of subdued commodity prices and rising costs.
“The situation is far from ideal, and there has not been a fundamental change over the past year to jumpstart South Africa’s industrial sector.”
He adds that it will take several quarters for the mining sector to reap the benefits of improved power supply and the possible efficiencies of the new government.
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Negative contributors in mining production
FNB Senior Economist, Thanda Sithole says the negative contributors were nine out of 12 divisions.
Iron Ore output declined by 3.8% year-on-year, shaving off 0.5 percentage points (ppts), but expanded by 10.4% month-on-month.
“Gold output contracted sharply by 11.5% year-on-year (and by 9.2% month-on-month), shaving off 1.5ppts and marking the 13th successive month of annual decline.
“The continued decline in gold production is partly attributed to higher operating costs due to ageing, ultra-deep mines, and declining ore grades.”
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More declines in the industry
Sithole adds that coal output contracted by 1.6% year-on-year dragging total mining growth by 0.3ppts. Seasonally adjusted output increased by 2.2% month-on-month.
“Manganese ore output declined slightly by 0.1% (and by 0.7% month-on-month, seasonally adjusted) after declining by 4.0% year-on-year (-8.9% month-on-month) in October 2024.”
Better performance than 0% growth
He says mining output increased by close to 1% between January and November 2024, which is a better performance compared to 0% growth in 2023.
“However, last year’s performance has been mixed, with mining divisions such as platinum group metals (PGMs), chromium ore, coal, and manganese ore supporting growth. Meanwhile, gold, other metallic minerals, and iron ore have been a drag.”
“We expect the continued suspension of load-shedding and gradually stabilising logistic systems to support production over the near-to-medium term.”
However, slowing growth in China, a generally subdued external demand environment, and weak prices for South Africa’s major commodity exports could limit the upside.
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