Mining production hits record low as manufacturing plunges too
Drop of 47.3% in April is the biggest since Stats SA’s mining series began in 1980
Mining production plummeted to its worst levels yet in April as the lockdown weighed on the sector, data released by Stats SA on Wednesday shows.
Mining and manufacturing data reflect an already weak economy receiving a body blow from the Covid-19 lockdown.
The release, which covers March and April, is among the first concrete data points from the agency providing insight into how SA’s economy performed under the severest round of the government’s lockdown restrictions, which began on March 27 and ran throughout April.
Annual manufacturing production for March contracted 5.4%, the tenth month of consecutive declines — highlighting intensifying weakness in the sector even before much of industry was shut due to the lockdown, economists said. A far deeper contraction for manufacturing is expected for April.
The prints come after business confidence hit its lowest levels on record in the second quarter. Business confidence is an early indicator of private sector fixed investment and growth — suggesting that any recovery after the lockdown, which moved to level 3 in June, is likely to be fitful and difficult.
Annual mining production fell 47.3% in April, the biggest fall in production since Stats SA’s mining series began in 1980. Mining production in March contracted 18% year on year from a revised growth rate of 5.8% in February.
April’s decline was led by platinum group metals (PGMs), which declined 62%; iron ore, down 68.7%; gold, which fell 59.6%; and manganese, down 57.6%.
All miners experienced a slowdown in production, said Juan-Pierre Terblanche, principal services statistician, but coal production was the least affected, falling 9.1% year on year. Certain coal mines that provide coal to power utility Eskom were deemed an essential service during the lockdown and were permitted to operate.
March’s figures for mining and manufacturing production were driven by domestic structural features, predominantly electricity shortages, BNP Paribas senior economist Jeffrey Schultz told Business Day.
Worst to come
“The two industries are very interlinked and suffer from the same structural problems owing to electricity supply,” he said, with March being hard hit by power cuts by Eskom.
But the worst is yet to come for manufacturing production data, he noted, as the lockdown during April brought business activity to a near standstill. Schultz is expecting a year-on-year contraction of more than 80%.
According to Stanlib chief economist Kevin Lings mining production, during both March and April, was also likely hurt by global developments, as many countries were either in restrictive lockdowns or not open enough to drive demand for SA minerals.
April’s decline intensified due to the local lockdown, he said. Though mining production is likely to pick up in the next coming months as restrictions ease, it will not be “to the point where you are going to regain all the lost ground”, Lings said.
March’s manufacturing data reflects “the underlying weakness of the SA economy that’s been developing, more acutely, over the last two years”, he said. Among other things, this was driven by pressure on consumers and poor levels of investment.
Against this backdrop April’s data for manufacturing production is likely to be “shocking” as the lockdown effects are tallied, Lings said.