{"id":826798,"date":"2025-06-04T17:10:00","date_gmt":"2025-06-04T15:10:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=826798"},"modified":"2025-06-04T17:10:08","modified_gmt":"2025-06-04T15:10:08","slug":"one-of-south-africas-most-important-industries-in-a-technical-recession","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/826798\/one-of-south-africas-most-important-industries-in-a-technical-recession\/","title":{"rendered":"One of South Africa’s most important industries in a technical recession"},"content":{"rendered":"\n

The mining sector, an important pillar of South Africa\u2019s economy, has entered a technical recession following a contraction in the first quarter of 2025.\u00a0<\/p>\n\n\n\n

This is according to Hugo Pienaar, chief economist at the Minerals Council South Africa (MCSA), who highlighted that the industry\u2019s output declined for the second consecutive quarter.<\/p>\n\n\n\n

Mining contributes significantly to the South African economy, accounting for around 6% of the country\u2019s nominal GDP in the first three quarters of 2024.<\/p>\n\n\n\n

Stats SA data further reveals that the sector is also a crucial source of employment, responsible for approximately half a million formal jobs.<\/p>\n\n\n\n

The mining sector is also a key driver of tax revenue and foreign exchange earnings, making it crucial for the country\u2019s well-being.<\/p>\n\n\n\n

However, domestic and global factors have led to prolonged stagnation and decline in South Africa\u2019s mining sector.<\/p>\n\n\n\n

Stats SA revealed that real GDP growth momentum weakened in the first quarter of 2025 as the economy expanded by only 0.1% quarter-on-quarter (q-o-q). <\/p>\n\n\n\n

This was weaker than the downwardly revised 0.4% GDP increase recorded in the fourth quarter of 2024. <\/p>\n\n\n\n

Despite the notable easing in growth momentum, the actual outcome was above the Bloomberg market consensus that real GDP growth stalled, experiencing no growth in Q1. <\/p>\n\n\n\n

The economy showed broad-based weakness, with six out of ten major sectors shrinking over the first quarter, while four posted increased activity. <\/p>\n\n\n\n

Among the sectors that contracted, mining performed the worst in the first quarter. In real terms, mining GDP declined by a notable 4.1% q-o-q. Its decline alone subtracted 0.2 percentage points from overall GDP. <\/p>\n\n\n\n

Manufacturing also weighed on the economy with a 2% contraction, while agriculture was the star performer, expanding by 15.8% and contributing 0.4 percentage points to GDP growth.<\/p>\n\n\n\n

Beyond its immediate output figures, the mining sector also showed worrying signs in profitability. <\/p>\n\n\n\n

Policy reform is needed to benefit from South Africa’s mineral wealth<\/h2>\n\n\n
\n
\"\"<\/a>
Hugo Pienaar, chief economist at the Minerals Council South Africa (MCSA)<\/em><\/figcaption><\/figure><\/div>\n\n\n

\u201cStats SA\u2019s gross operating surplus data, a broad measure of profitability, highlighted the pressure miners are under,\u201d Pienaar explained.\u00a0<\/p>\n\n\n\n

\u201cThis weakness came despite a 1.3% quarter-on-quarter rise in the SA Reserve Bank\u2019s export commodity price index, buoyed by a sustained increase in the gold price.\u201d <\/p>\n\n\n\n

In other words, even improving prices could not lift mining profits, primarily due to weak production and output.<\/p>\n\n\n\n

That weak production, particularly in platinum group metals (PGMs), was primarily due to adverse weather conditions early in the year. <\/p>\n\n\n\n

\u201cHeavy rains in the northern provinces disrupted PGM mining in January and February,\u201d said Pienaar. <\/p>\n\n\n\n

\u201cThese weather-related issues also affected output in chrome, gold, and building materials. <\/p>\n\n\n\n

While these disruptions were significant, they were temporary. This suggests we could see some rebound in Q2.\u201d Even employment costs point to a slowdown in momentum. <\/p>\n\n\n\n

While the compensation of mining employees increased by 2.6% year-on-year in the first quarter, this was well below the 3.9% growth seen in non-mining sectors. <\/p>\n\n\n\n

The sector\u2019s challenges have also weighed on investor confidence. \u201cReal private sector investment has declined in four of the last five quarters,\u201d Pienaar said.<\/p>\n\n\n\n

\u201cThat reflects low business morale, which is an important reason for the overall sluggish GDP growth in South Africa.\u201d<\/p>\n\n\n\n

Looking ahead, a modest recovery in mining output is likely in the short term as weather conditions normalise.\u00a0However, Pienaar cautioned that deeper structural issues will continue to hold the industry back.\u00a0<\/p>\n\n\n\n

\u201cUncompetitive electricity pricing, ongoing constraints in rail and port logistics, and global trade tensions will cap the pace of recovery,\u201d he said. More importantly, Pienaar stressed the need for policy reform. <\/p>\n\n\n\n

\u201cFor mining to grow and support the broader economy, South Africa needs a more supportive and investor-friendly regulatory environment,\u201d he said. <\/p>\n\n\n\n

The Minerals Council is reviewing the draft Mineral Resources Development Bill and engaging with the Department of Mineral and Petroleum Resources. <\/p>\n\n\n\n

The goal is to create a framework that will encourage exploration, the development of new mines, and the long-term sustainability of existing operations.<\/p>\n\n\n\n

\u201cThis is essential to unlock the full potential of South Africa\u2019s mineral wealth, and to position the sector as a driver of higher economic growth and job creation,\u201d Pienaar said. <\/p>\n\n\n\n

\"\"<\/a><\/figure>\n","protected":false},"excerpt":{"rendered":"

An important pillar of South Africa\u2019s economy has entered a technical recession.<\/p>\n","protected":false},"author":92,"featured_media":794279,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[17126,2319,853,1809],"class_list":["post-826798","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-minerals-council-south-africa","tag-mining","tag-south-africa","tag-stats-sa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/826798","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=826798"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/826798\/revisions"}],"predecessor-version":[{"id":826805,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/826798\/revisions\/826805"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/794279"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=826798"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=826798"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=826798"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}