{"id":782064,"date":"2024-07-11T16:01:15","date_gmt":"2024-07-11T14:01:15","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=782064"},"modified":"2024-07-11T16:01:21","modified_gmt":"2024-07-11T14:01:21","slug":"double-blow-for-south-africa-2","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/782064\/double-blow-for-south-africa-2\/","title":{"rendered":"Double blow for South Africa"},"content":{"rendered":"\n

Mining and manufacturing data failed to see year-on-year increases in May. <\/p>\n\n\n\n

Mining production was flat in May 2024 compared with May 2023, below the Bloomberg consensus expectations of a 0.9% year-on-year increase. <\/p>\n\n\n\n

The main positive contributors were coal (7.0% and contributing 1.6 percentage points) and chromium ore (17.1% and contributing 0.7 of a percentage point). <\/p>\n\n\n\n

However, Investec economist Lara Hodes said that six of the twelve mineral categories included in the index contracted when compared to the same period last year, with gold and PGMs output falling by 9.0%. <\/p>\n\n\n\n

“Domestically, the energy-intensive mining sector has benefitted from an improvement in electricity supply over the last few months; however, it continues to face a number of other structural challenges, including a fragile water supply infrastructure and logistical constraints,” said Hodes. <\/p>\n\n\n\n

May was also a poor month for the manufacturing sector, with production dropping from an increase of 4,9% in April to a contraction of 0.6% in May – below the Bloomberg consensus of a modest 0.2% increase. <\/p>\n\n\n\n

“A breakdown of the manufacturing data indicates that the decrease in annual production was largely underpinned by declines in the basic iron and steel, non-ferrous metal products, metal products and machinery segment and the motor vehicles, parts and accessories and other transport equipment grouping,” said Hodes. <\/p>\n\n\n\n

She added that the result broadly aligns with Absa’s Purchasing Managers\u2019 Index (PMI) for May, which fell from the above-neutral (50) score of 54.0 in April to 43.8 in May. <\/p>\n\n\n\n

Business activity and the new sales orders’ indices dropped considerably during the month.<\/p>\n\n\n

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Source: Stats SA<\/figcaption><\/figure><\/div>\n\n
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Source: Stats SA<\/figcaption><\/figure><\/div>\n\n\n

Questions over a recession <\/strong><\/p>\n\n\n\n

Although manufacturing and mining are key indicators for South Africa’s GDP performance, the most recent BankservAfrica Economic Transactions Index (BETI)<\/a> shows that the country will likely avoid a contraction in Q2 2024. <\/p>\n\n\n\n

The BETI, which measures the value of all electronic interbank transactions processed by BankservAfrica at seasonally adjusted real prices, moderated slightly in June.<\/p>\n\n\n\n

\u201cThe BETI reached an index level of 135.8, slightly down by 0.5% from the 136.4 recorded in May,\u201d says Shergeran Naidoo, BankservAfrica\u2019s Head of Stakeholder Engagements. <\/p>\n\n\n\n

At this index level, the BETI is still 1.6% higher than in March, suggesting that economic performance bettered Q1 2024’s results and will lead to\u00a0a positive outcome for Q2 2024.<\/p>\n\n\n\n

\u201cSince the end of March, South Africa has been free from load shedding, creating a more productive economic environment,\u201d said Elize Kruger, Independent Economist.<\/p>\n\n\n\n

\u201cAdditional activity relating to the National Elections in May has also stimulated economic activity in recent months.\u201d<\/p>\n\n\n\n

\u201cBut a likely reduction in temporary employment post-election, along with uncertainties around the election outcome and the establishment of a new political dispensation for South Africa, contributed to the slackness in economic activity during June.” <\/p>\n\n\n\n

\u201cAdded to these are the ongoing stresses of the elevated interest rates and high cost of living impacting South Africans.\u201d<\/p>\n\n\n\n

South Africa\u2019s GDP dropped by 0.1% in Q1 2024, but the BETI suggests the country should escape a technical recession\u00a0<\/strong>(two straight quarters of retractions).<\/p>\n\n\n\n

That said, the poor performance from both sectors is causing concern. <\/p>\n\n\n\n

Thanda Sithole, FNB Senior Economist, said that the data suggests that the mining sector’s gross added value could, depending on the June data print, again drag GDP growth in Q2 2024. <\/p>\n\n\n\n

This clouds the bank’s expectations for a GDP growth rebound following the 0.1% contraction in Q1 2024. <\/p>\n\n\n\n

For the three months ending in May, manufacturing output was also down by 0.4%, suggesting that the sector, pending the June data, could also drag GDP growth.<\/p>\n\n\n\n

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One of South Africa’s biggest employers is crumbling<\/a><\/blockquote>