SA mining production mining slips 3.6% y/y

Mining production in South Africa has experienced a significant decline, with a 3.6% year-on-year contraction reported in July, according to recent data from Statistics South Africa. This decline was particularly notable in the Platinum Group Metals (PGMs) sector, which has been heavily impacted by challenges related to electricity supply. Mineral sales have also taken a hit, decreasing by 24.7% in the same period. The mining sector, which contributes over R7 trillion of value to the Johannesburg Stock Exchange, is facing a confluence of issues that are impacting its performance. CNBC Africa spoke with Henk Langenhoven, Chief Economist at the Minerals Council of South Africa, to delve deeper into the factors behind this downturn. One of the key points highlighted in the discussion was the correlation between the level of difficulty faced by mining companies in getting their products to market and the contraction in production. Langenhoven emphasized that while various commodities like iron ore, chrome, and coal have also seen declines, PGMs and iron ore have been particularly affected. The challenges in infrastructure, electricity supply, and security issues are contributing to the sluggish performance in the mining sector. Langenhoven pointed out that the decline in mineral sales may be more influenced by global commodity prices, which have dropped by 23% up to September, than internal logistical constraints. The impact of the global economic slowdown, especially in China, is being felt in South Africa's mining industry, with reduced demand and lower commodity prices affecting export earnings. The Chief Economist highlighted the concerning decrease in export earnings, which have fallen by around 4%, raising alarms for the Minister of Finance. The decline in diamond production and the disruptions caused by electricity shutdowns were also cited as factors contributing to the overall challenges in the sector. Despite some positive signs like the increase in chrome ore prices, the uncertainty surrounding logistics and market deliveries remains a significant issue. The discussion also delved into the implications for government revenue, with a significant portion of tax revenue coming from the mining sector. Langenhoven noted that while the industry had provided a substantial boost to government coffers through increased prices in recent years, the current downturn in prices could have a significant impact on tax revenues. The potential decline in tax contributions from mining companies, coupled with challenges around export volumes and profitability, could pose a considerable fiscal challenge for the government. Overall, the analysis provided by Henk Langenhoven underscored the complex dynamics at play in the South African mining sector and the broader economic implications of its current challenges.