AMN - Mining helps South Africa avoid recession – comment by Yolanda Torrisi

There has been plenty of doom and gloom emanating from South Africa in 2017 placing a black cloud over its mining industry but at least mining has helped the country avoid slipping into a technical recession. This appeared certain after the economy contracted 0.3 per cent in the December quarter of 2016 but growth in mining output along with a slight increase in manufacturing output reversed the trend in the first few months of 2017.

A report from Reuters states that a second consecutive quarterly contraction would have pushed South Africa into recession for the first time since the 2009 global financial crisis.

Increased demand from China and better global commodity prices saw mining output in the first quarter beat expectations of a 4.3 per cent increase, which was a two-year high, while modest manufacturing growth in March also contributed to a better period for South Africa.

Statistics South Africa states that mining output during the quarter increased by 15.5 per cent and manufacturing grew by 0.3 per cent year-on-year in March after shrinking by 3.7 per cent in February. This was well wide of expectations of a 2 per cent contraction.

Nedbank’s senior economist Nicky Weimar told Reuters that the better mining output, growth in agriculture and improved vehicle sales should keep first quarter GDP growth in positive territory.

Despite the improvement, the country’s economy remains under pressure with credit downgrades, resource nationalism and political changes not helping.

In April credit ratings were downgraded to sub-investment after President Zuma removed finance minister Pravin Gordhan from the role while subsequent Mining Act changes have increased concerns and threaten to further reduce investment in the sector.

Uncertainty about the future has seen differing forecasts about growth for the remainder of the year with Treasury saying it expects the economy to expand by 1.3 per cent this year while the International Monetary Fund expects growth of just 0.8 per cent.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com