Picture: SOWETAN
Picture: SOWETAN

The mining sector took a knock in November with a larger-than-expected contraction.

Analysts said the reversal in the sector was largely due to protests at some gold mines since mid-November and intermittent load-shedding by Eskom towards the end of 2018.

Mining production decreased 5.6% year on year in November, data from Statistics SA showed on Tuesday. This comes after three months of declining mining production was halted in October, with surprise annual growth of 0.5%.

The Bloomberg economists' consensus was a 0.1% decline.

“Overall, it’s not a good story,” Minerals Council chief economist Henk Langenhoven said.

The sector also faces headwinds from a potential escalation in global trade tensions between the two largest economies and a slowing global economy, particularly with sluggish growth expected in China.

Exports of resources remain a key driver of economic growth in SA. 

"A further slowdown in commodity prices would negatively affect both the rand and economic growth," Investec economist Lara Hodes said, adding that this would be exacerbated by global trade tension amid softening international trade and investment. 

“The outlook is certainly volatile as we know of more disruptions since November last year that are not yet reflected in the figures,” Langenhoven said.

Most sub-sectors reported lower production in November compared to a year earlier.The largest negative contributors were iron ore, down 19.7%; gold, down 14%; diamonds, down 21.7% and “other” non-metallic minerals down 12.4%.

Gold, in particular, saw its longest losing streak since 2012.

"Production keeps on falling because of the difficulties in mining," Langenhoven said.

Two major gold producers, Sibanye-Stillwater and Gold Fieldswere affected by strike action during November. This could continue to dent the production figures with no resolution yet at Sibanye.

Compared to the month before, seasonally adjusted mining production fell 5.8% in November, following positive month-on-month changes of 3% in October and 0.7% in September.

Statistics SA reported that its mining production index, which was set to 100 points in 2015, was 101.4 in November, down from 104.9 points in October and 107.4 in November 2017.

“If you look at the commodity price index for SA, there was a good correlation between production and commodity prices before 2010. Since then, a lag of about 12 months has developed. What we see at the moment is a response to the drop a year before due to commodity price and rand exchange rate movements,” Langenhoven said.

The total sales of SA's mining industry in November came to R45.46bn, an 8% increase from R42.11bn in November 2017.

Statistics SA shows coal is SA's biggest revenue earner, with sales of R13.67bn in November followed by platinum group metals with total sales of R10.71bn, and iron ore at R5.85bn.

menons@businesslive.co.za