Mining sector’s woes deepen as production contracts for a sixth consecutive month
However, mining production lifting 4.2% month-on-month in March has some economists saying the second quarter is expected to see an improvement
Mining production contracted 1.5% year-on-year in April, extending the sector’s fall to a sixth consecutive month.
Gold production in April fell by almost 19.7% year-on-year, data from Stats SA showed on Thursday, while mining production fell 2.3% in April compared with March. The latter figure is almost five times the 0.5% contraction expected in the Bloomberg consensus.
The sector has been hard hit in recent months by strikes at gold mines led by the Association of Mineworkers and Construction Union (Amcu).
About 15,000 workers went on strike for almost five months at the Driefontein, Kloof and Beatrix mines. Workers returned to work at the end of April.
An end to load-shedding in April, however, had raised the hope that the sector would recover a little. Mining production had lifted 4.2% month-on-month in March, albeit off a low base, but in year-on-year terms, SA’s mining sector has contracted for six months.
Although this outcome spells a weak start to mining production for the second quarter, an improvement is expected to be seen in the May and June, said FNB economist Matlhodi Matsei.
Factors likely to support recovery include improved electricity supply compared to the first quarter, as well as some normalisation in gold mining production following the end of the protracted strike at Sibanye-Stillwater, Matsei said in a note. “Nevertheless, the backdrop of cooling global activity and ongoing trade tensions presents downside risks to this potential recovery.”
PODCAST | Business Day Spotlight - Government, Eskom & Sasol are on the hook for "Deadly Air"
Thursday’s data comes after positive manufacturing and retail sales data for the same month, released on Tuesday and Wednesday, respectively.
Retail sales had rebounded 2.4% in April year-on-year and manufacturing 4.6% over the same period, raising the hope that SA will escape a technical recession in the second quarter of 2019.
SA’s economy contracted by an unexpected 3.2% in the first quarter, though economists expect economic activity to pick up in the course of 2019.
It is too soon to tell whether SA dodged a technical recession, although other data this week suggests SA’s economy started the quarter on a brighter note, said Capital Economics emerging-markets economist Virág Fórizs in a note. “But data is only available for the first month of the second quarter and more timely survey data suggest that conditions softened again in May.”