JOHANNESBURG, South African mining production has recorded its first contraction this year, fallingl 0.8 per cent year-on-year in June after recording an increase of 4.1 per cent in May.
According to FNB Securities, a continued decline in platinum group metals and a plunge in iron ore production were largely responsible for the fall in mining output.
This is another blow to an already stagnant economy in which jobs are being shed at an alarming rate. The mining sector is still expected to shed more jobs with companies such as AngloGold Ashanti, Bokoni Platinum and Sibanye Gold all announcing plans to close some of their shafts.
Economists at the University of Cape Town say structural and policy direction continue to hit the economy. “We’ve got a policy and governance environment that is not conducive to investments and green field investments and we continue to lose existing mines and I think that is constraining investors,” said UCT economist Haroon Bhorat
“So we are finding the mining industry that is not interested and understandably worried about further investing in an environment where governance and stipulations in the governance of the mining are unclear.”
The good news is that economists believe that the current situation is likely to be transitory. The industry could pick up towards the end of the year, they said, pointing to a favourable global commodity outlook.
“We are in a period where growth is picking up, global growth is picking up and there’s an element of if you like an increase in global commodity prices but unfortunately we’re facing other constraints and I think that’s our concern in the mining industry,” said Bhorat.
Domestic growth generally, at least according to the South African Reserve Bank, has deteriorated amid weak business and consumer confidence. The central bank’s forecast for GDP growth has been revised down to 0.2 per cent point for the current year and to 0.3 per cent in 2019.
Even the Cabinet has weighed in on the issue, raising concerns about the state of job losses in the country, particularly in the mining and retail sectors.
Source: NAM NEWS NETWORK