One step forward, two steps back for mining in South Africa

Mining production has benefitted from decreased load shedding, but poor water supply and logistical challenges are hurting the sector.

Mining production rose 0.7% year-on-year in April after declining by 4.8% (revised from -5.8% year-on-year) in March.

However, the outcome was below the consensus on Bloomberg of 1.1%.

Seasonally adjusted mining production also increased by 0.8% in April 2024 compared with March 2024.

Investec Economist Lara Hodes noted that PGMs were the largest positive contributor to the headline reading.

Production increased by a notable 16.9% y/y in April, and given its large size in the mining basket of 26.05%, it added 4.3% points.

“According to the World Platinum Investment Council, global demand for platinum rose in the first quarter of the year, supported by an uptick in jewellery demand and growth in the automotive sector. Despite this, the sector continues to face a number of challenges,” said Hodes.  

Eight of the 12 mineral categories in the index contracted over the year, preventing a significant lift in April’s reading.

Manganese ore, iron ore and coal output dropped by 22.5% y/y, 7.5% y/y and 3.6% y/y, respectively. This took a combined 3.7% points off the headline figure.

“Domestically, the energy-intensive mining sector likely benefitted from a suspension in rotational load shedding during the month,” said Hodes.

“However, it continues to face a number of other structural challenges, including a fragile water supply infrastructure which has deteriorated over the years due to lack of acceptable maintenance.”

“Moreover, while progress has been made with regards to easing congestion at the ports, South Africa’s logistical challenges continue to weigh on activity and export potential.”

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