South Africa's mining industry faces stark declines amid global uncertainty

The mining industry in South Africa continued to face bleak prospects after output plunged more than expected in April, signalling the continued sinking of the productive sectors of the economy. 

According to data from Statistics South Africa (Stats SA) on Thursday, mining production slipped by 7.7% year on year in April following a revised 2.5% decline in March.

This April reading was more than an expected 4.3% decline and pointed to the sixth consecutive month of downturn in the country's sector.

Jean-Pierre Terblanche, principal service statistician at Stats SA, said the decline was led by a fall in the production of platinum group metals (PGM) which contracted by 24.1% from a decline of 9.9% in March.

“Nickel, copper, gold and coal also performed poorly in April,” Terblanche said.

“On the upside, diamonds, iron ore, chromium ore and manganese ore recorded positive gains, but not enough to lift the mining industry into positive territory.” 

The decline in mining output, following hot on the heels of manufacturing production’s 6.3% nosedive in April, signalled the start on a bad footing of the country’s gross domestic product (GDP) for the second quarter of the year. 

Further disaggregation of the mining data indicated that the 2.5% and 1.7% decline in gold production and coal output, respectively, detracted a further, combined -0.6 of a percentage point from the topline reading.

"Domestically, ongoing challenges that affect the sector’s global competitiveness include double-digit electricity tariff escalation which has constrained deep-level mining and local beneficiation, as well as inefficient rail and port logistics," said Bongani Motsa, senior economist at the Minerals Council. 

Output also decreased by 6.1% for building materials and by 5.2% for other non-metallic minerals while other metallic minerals, diamonds and iron ore recorded the biggest increases. 

Investec economist Lara Hodes said elevated uncertainty around the extent and effect of tariffs on global trade and growth remained a key downside risk to mining output. 

On April 2, US President Donald Trump introduced a 10% base tariff on nearly all imports into the US, with additional reciprocal tariffs for specific countries.

However, these reciprocal tariffs were suspended for 90 days to allow room for negotiations.

While the majority of South Africa’s minerals and metals sold to US consumers such as PGM, coal, gold, manganese and chrome were excluded from the tariffs, there are some like iron ore and diamonds that were subject to the 30% tariff on imports.

Despite the exclusions, the mining industry remained concerned about the adverse impact on business and consumer sentiment and the resultant feedthrough to business investment, consumer spending and ultimately global real GDP growth caused by this unprecedented upheaval in world trade.

The US is South Africa’s second-largest trading partner, and any deterioration in this relationship could have serious consequences for the country's export industries, particularly in sectors such as agriculture, automotive manufacturing, and mining.

Hodes said global manufacturing conditions worsened with new export orders suffering its steepest decrease since August 2023 particularly in April, which was evident in the JP Morgan Global Manufacturing PMI survey results.  

“Despite the surge in the gold price as a safe-haven investment, amidst a highly uncertain global environment, production domestically faces a myriad of challenges,” Hodes said. 

“Specifically, the domestic mining sector as a whole has to contend with heightened input costs, labour challenges, the effects of illegal mining and notably logistics bottlenecks, weighing on activity and export potential.” 

On a seasonally adjusted monthly basis, mining output rose by 0.6% in April after an upwardly revised 3.6% advance in March. However, mining production shrank by 2.7% in the three months ended April compared with the previous three months.

FNB senior economist Thanda Sithole said near-term mining activity remains under pressure from slowing global growth and persistent global uncertainty.

Sithole said although output edged up by 0.4% in 2024, year-to-date performance has been disappointing, with output down 5.4% in the first four months compared to the same period last year.

"This points to a negligible or potentially negative contribution from the mining sector to 2025 GDP growth, reinforcing our view of downside risks to the economic outlook," Sithole said.

"The medium-term outlook should be supported by ongoing infrastructure reforms, particularly in energy and logistics. However, how the global economy evolves will also be critical in determining the mining sector’s response."

BUSINESS REPORT