Economic growth in South Africa could rebound slightly by the end of the year if load shedding and the logistics crisis do not disrupt the momentum in industrial activity after mining and manufacturing output began the fourth quarter of 2023 on a positive note.
Mining and manufacturing industries are two major contributors to the South African gross domestic product (GDP), and their 1.1% and 1.3%, respective, declines in the third quarter weighed on GDP output as it contracted by 0.2% after two consecutive quarters of growth.
Data from Statistics South Africa (StatsSA) yesterday showed that mining production rebounded by 3.9% in October compared to the same month a year ago, buoyed by platinum group metals (PGMs), following a 1.9% decline in September.
This mining print surpassed market forecasts of a 1.5% increase and was the strongest since November 2021, marking the first upturn in industrial activity after three consecutive months of declines.
StatsSA’s principal survey statistician,Juan-Pierre Terblanche, said PGMs, manganese ore, and chromium ore were the largest positive contributors to overall growth, while gold, copper, and nickel also made notable contributions.
“PMGs grew by 16.9%, manganese by 8.9%, and chromium ore by 13.8%. Nickel, gold and copper were also strong in October. Coal production was flat year-on-year,” Terblanche said.
“On the downside, the production of diamonds declined by 21.7%, and iron ore output was down by 3.7% year-on-year.”
On a seasonally adjusted monthly basis, mining production increased by 2.1% in October following a downwardly revised 0.1% fall in September and an increase of 0.9% in August.
In the three months ended October, seasonally adjusted mining production increased by 0.7% compared with the previous three months.
FNB senior economist Thanda Sithole, however, was not as optimistic about mining prospects in South Africa in the near future on the back of the ongoing energy and logistics crises, as well as subdued demand for commodities.
“Mining output is down by 1.3% in the year-to-date (January to October), consistent with our view of weak performance, albeit less severe compared to the 7.1% decline last year,” Sithole said.
“The lingering impact of load shedding, as well as rail and ports infrastructure inefficiencies, is expected to continue to disproportionately weigh on the sector’s activity. Slowing global growth, including in China, bodes ill for South Africa’s major mineral exports.”
Meanwhile, StatsSA said manufacturing output increased by 2.1% year-on-year in October, following a downwardly revised 4.1% decline in September.
This manufacturing print was also higher-than-market estimates of a 1.8% year-on-year expansion.
StatsSA's director of industry statistics, Nicolai Claassen, said six of the 10 manufacturing divisions recorded stronger results in October, driven mainly by petroleum, chemicals, rubber, plastics and automotive divisions bringing much of the upward momentum.
“Manufacturers in the petroleum, chemicals, rubber, and plastics products recorded an increase of 7.8%, and output in the automotive division was up by 6% year-on-year. Other divisions that recorded positive growth include metals and machinery products, electrical machinery, wood, paper, printing and publishing, and furniture and other manufacturers,“ Claassen said.
“Four manufacturing divisions recorded poor year-on-year results in October. These were food and beverages, communication and professional equipment, glass and non-metallic products, and textiles and clothing.”
On a seasonally adjusted monthly basis, manufacturing production eased by 0.2% in October following a 0.8% contraction in September and a slight 0.5% increase in August.
Seasonally adjusted manufacturing production decreased by 0.7% in the three months ended October compared with the previous three months.
Investec economist Lara Hodes said he fragile global environment, especially the subdued manufacturing sector, continued to weigh notably on commodity demand notwithstanding October’s result, which was buoyed by base effects.
“Despite October’s result, the sector remains lacklustre. Indeed, the seasonally adjusted (SA) headline Purchasing Managers’ index (PMI) moved further into contractionary territory (below 50) at the start of the fourth quarter,” Hodes said.
“The unfavourable outcome was largely underpinned by a slump in the business activity index. Subdued global conditions and the myriad of domestic challenges also continue to impede manufacturing sector activity and export potential.”
BUSINESS REPORT