Mines chamber upbeat despite policy uncertainty
Chief economist Henk Langenhoven says the Chamber of Mines remains positive despite the uncertainty created by the ongoing discussions on a new Mining Charter
The mining and manufacturing sectors recorded growth in the first quarter of 2017 after a disappointing run in the last months of 2016, but policy uncertainty remains a concern, especially in mining.
Speaking about the latest mining production figures, Chamber of Mines chief economist Henk Langenhoven said the numbers were looking good but "we don’t know yet about policy. We’re in negotiations but there is concern."
Policy certainty "would help because mining is a risky business", he said.
Mining production recorded a 1.3% year-on-year increase in January. Seasonally adjusted production rose 1.7% month on month compared with December’s 0.3% contraction.
Langenhoven said the Chamber of Mines remained positive despite the uncertainty created by the ongoing discussions on a new Mining Charter.
"World economic growth is looking better, commodity prices have improved and profits have turned.
Policy uncertainty has built up over time, it doesn’t happen overnight. A lot of damage has been done with uncertainty and interference. There doesn’t seem to be recognition on the part of government
"We’re coming off a very low base but it’s improving. It will be a while before employment will improve. Production will need to continue to improve."
Economists are worried, however, that policy uncertainty has weighed down the sector quite heavily.
Econometrix MD Azar Jammine said: "Policy uncertainty has built up over time, it doesn’t happen overnight. A lot of damage has been done with uncertainty and interference. There doesn’t seem to be recognition on the part of government.
"Most of the industry saw declines in January but the few positives outweighed this.
"You would have thought an improvement in commodity prices would have helped.
Government interference is having a negative impact."
A total of 65,000 jobs (15% of the mining sector workforce) had been lost in 2016, Jammine said, because the private sector was pulling out of SA and investing elsewhere.
Nedbank economist Dennis Dyke said: "We’re not overly optimistic. The policy environment is not changing and that begs questions for the sector."
Deputy Finance Minister Mcebisi Jonas said on Monday at a Gordon Institute of Business Science discussion that the government needed to create more certainty. He cited the low levels of fixed-asset investment, which have declined over the years, as a major concern.
Manufacturing production grew 0.8% year on year in
January. The improvement was mainly from the food and beverage, petroleum processing and metal products sectors.
John Ashbourne, a Capital Economics economist, said: "Even if today’s figure was a bit of a disappointment, the key point is that output in January was an improvement compared with the sector’s performance in recent quarters."