South Africa’s mining production decreased in September, falling for an eighth consecutive month.
According to data from Stats SA, mining production fell by 4.5 per cent year-on-year after a drop of 6.4 per cent the previous month.
The last time the industry experienced a consecutive decrease of this magnitude was between February 2020 and February 2021, at the height of the Covid-19 pandemic.
Statistics South Africa (Stats SA), formerly known as the “Central Statistical Service”, is the national statistical service of South Africa with the aim of producing timely, accurate and official statistics in order to advance economic growth, development and democracy. Statistics South Africa produces official demographic, economic and social censuses and surveys.
Stats SA publishes monthly mining production indices and mineral sales based on the information furnished by the Department of Mineral Resources and Energy (DMRE).
Iron ore and gold were the largest negative contributors to the mining production data.
Iron ore decreased by 23.1 per cent, contributing -2.7 percentage points, while gold fell by 12.4 per cent and contributed -2.1 percentage points.
However, seasonally-adjusted mining production increased by 0.1 per cent in September 2022 compared with August 2022. This followed month-on-month changes of -0.6 per cent in August 2022 and 2.5 per cent in July 2022.
Seasonally adjusted mining production increased by 2.2 per cent in the third quarter of 2022 compared with the second quarter of 2022. The largest positive contributors were gold with 9.6 per cent; diamonds with 20.4 per cent; coal 3.2 contributing per cent; and manganese ore with 10.2 per cent and contributing 0.7 of a percentage point according to Stats SA.
Mineral sales at current prices increased by 20.7 per cent year-on-year in September 2022. The largest positive contributors were: coal with 63.1 per cent and contributed 14.1 percentage points; gold contributed 122.4 per cent and contributed 10.0 percentage points; ‘other’ metallic minerals 164.0 per cent and contributed 3.1 percentage points; and manganese ore with 33.0 per cent and contributing 1.7 percentage points.
South Africa produces over 250 million tonnes of coal every year. It is estimated that almost 75 per cent of this coal is used domestically. Nearly 80 per cent of the energy needs of South Africa are taken care of by coal and over 90 per cent of the coal consumed on the entire African continent is produced in South Africa. The biggest coal deposits can be found in the Ecca deposits, a vein of the Karoo Supergroup in South Africa.
- South Africa’s annual decline in mining output has persisted for eight months, according to data from Stats SA
- Mining production decreased by 4.5 per cent in September, with the largest negative contributors being iron ore and gold.
- Seasonally adjusted mineral sales at current prices also decreased by 2.1 per cent in September 2022 compared with August 2022. This followed month-on-month changes of 1.3 per cent in August 2022 and 6.5 per cent in July 2022.
- Mineral sales at current prices increased by 20.7 per cent year-on-year in September 2022. The largest positive contributors were coal at 63.1 per cent; gold contributed 122.4 per cent; ‘other’ metallic minerals had 164.0 per cent and contributing 3.1 percentage points; and manganese ore with 33.0 per cent and contributing 1.7 percentage points.
Seasonally adjusted mineral sales at current prices decreased by 2.1 per cent in September 2022 compared with August 2022. This followed month-on-month changes of 1.3 per cent in August 2022 and 6.5 per cent in July 2022.
Seasonal adjustment is a means of removing the estimated effects of normal seasonal variation from the series so that the effects of other influences on the series can be recognised more clearly. Seasonal adjustment does not aim to remove irregular or non-seasonal influences which may be present in any particular month. According to Stats SA, seasonally adjusted estimates are generated each month using the X-12-ARIMA Seasonal Adjustment Program developed by the United States Census Bureau.
Inkunzi Wealth Economist, Owen Nkomo, said the sector is likely to remain depressed for the remainder of the year, according to SABC News.
“We have got the gold production numbers falling by 12.4 per cent against the forecast drop of 15 per cent and we have the mining production numbers coming down at 4.5 per cent which is 0.1 per cent below (what the) market was looking for and month-on-month basis a small improvement there, 0.1 per cent versus 0.6 per cent decline in the previous month.”
Economist says the sector is being negatively impacted by falling commodity prices, energy constraints and strike action by Transnet.
Meanwhile, South Africa’s mining leaders at the recent Johannesburg Mining Indaba sent out a relatively positive combined message. They were well aware of the challenges such as unreliable electricity, constrained rail capacity, crime and the threat of expropriation without compensation.
Nico Muller, CEO of Impala Platinum, commended the high level of mining expertise that is developed and applied in the country.
“With this depth of local skills and experience – in multiple disciplines – it is possible for mineral deposits to efficiently be turned to account,” he said.
Former Anglo American executive Mark Cutifani also commended the expertise in the country’s mining industry – arguing that there were sufficient skills to grow the sector further.
According to Africa News, South African mining is a major source of foreign exchange and jobs. The country’s minerals are key to its economic growth and recovery strategy.
Many of South Africa’s mineral reserves, estimated to be worth US$2.5 trillion remain unexploited. But growth has stalled in recent years. For instance, between 2010 and 2018, the industry saw a 10 per cent loss in output, 50,000 jobs wiped out, and a 45 per cent decrease in annual capital investment.
A lack of innovation, bad rail and port infrastructure, and unreliable electricity are blamed for the damage.
South Africa’s electricity infrastructure has been degrading in the past decade, with both scheduled and unscheduled power outages on the increase. This leads to anger and frustration among the public and clearly handicaps businesses and their productivity. The alleviation of the highlighted problems in mining is, therefore a critical precondition for the sector’s recovery.