Mining sector on the road to recovery


Mining - [] Mining - []

Jason Muscat, a senior economic analyst at FNB, said that despite a disappointing end to the year’s output, looking ahead mining was set to make a solid contribution to the annual gross domestic product (GDP).

“We expect the sector to regain momentum in the first half of 2018 given strong Chinese demand, particularly for iron ore,” he said.

“Commodity prices also remain supportive and we expect 2018 to deliver another year of mild growth.”

This week the Chamber of Mines told the Mining Indaba in Cape Town that mining contribution to the country’s GDP last year had improved by 3.7percent year on year to R312billion.

The indaba also heard that South Africa had more than R220bn worth of investments in the project pipeline with the changing political climate bolstering investor confidence after years of policy uncertainty, prompted mainly by the proposed new Mining Charter put forward by the Department of Mineral Resouces.

The current mining charter requires that 26percent of equity must be held by black investors, and the proposed charter envisages a rise to 30percent.

Econometrix chief economist Dr Azar Jammine said: “Shockingly weak mining output for December jeopardises positive outcome for fourth-quarter GDP growth and casts doubt on our hopes for at least 1percent growth in 2017, largely due to (platinum-group metals) and coal.”

Stats SA is expected to release the 2017 fourth-quarter growth rate next month. The market expectation is a 1.3percent increase, compared with the 2percent growth in the third quarter.

Manufacturing production in South Africa increased 2percent year on year in December and in line with expectations.

Food and beverages, petroleum, basic iron and steel, and motor vehicle and parts manufacturing were the main drivers of growth.

Weakness in the manufacturing sector persisted in the clothing and wood product manufacturing, with these subcomponents having contracted for nine and 12 consecutive months respectively. On a monthly basis, manufacturing output went up 1.1percent in December.

John Ashbourne, an Africa economist at Capital Economics, said strong manufacturing growth probably offset the weaker performance of the mining sector in the fourth quarter.

“Given that manufacturing makes up a larger share of GDP, we expect overall growth probably stayed around 2percent quarter-on-quarter in the fourth quarter. We’ll know more when December retail figures are released next week.”





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