It’s not all bad news for South Africa’s economy, as its mining and manufacturing sectors show signs of recovery. The news offers a potential boost to the nation’s economy as it grapples with load shedding and logistics crisis.
Mining and manufacturing are key contributors to South Africa’s GDP. However, the sector had experienced declines of 1.1% and 1.3%, respectively, in consecutive quarters. Not surprisingly, the decline led to an overall GDP contraction of 0.2% after two consecutive quarters of growth.
That’s all changed with the recent data from Statistics South Africa (StatsSA), which indicates a positive start to the fourth quarter. The growth was primarily driven by strong performances in platinum group metals (PGMs), manganese ore, and chromium ore. PGMs grew by 16.9%, marking the first upswing in industrial activity after three consecutive months of declines.
The upturn comes despite coal production remaining flat, a decline of 21.7% and 3.7% in diamond production and iron ore output.
The optimism in the mining sector is crucial for South Africa’s economic recovery. However, concerns have been raised by FNB senior economist Thanda Sithole. He highlighted ongoing energy and logistics crises and subdued global demand for commodities as factors that may impact future mining prospects.
In the manufacturing sector, output increased by 2.1% year-on-year in October. This was due to positive contributions from divisions such as petroleum, chemicals, rubber, plastics, and automotive. Six out of the ten manufacturing divisions recorded stronger results, signalling a diversified recovery.
However, on a monthly basis, manufacturing eased by 0.2% in October. And in the three months to the end of October, it fell by 0.7%.
What does the growth in the manufacturing and mining sector mean for South Africa’s economy?
Despite the positive results from October, economist Lara Hodes emphasized the fragile global environment affecting commodity demand.
The manufacturing sector continues to face challenges, including subdued global conditions and domestic issues. They both have the potential to hinder activity and export potential.
The mining and manufacturing sector’s performance in the fourth quarter of 2023 will play a crucial role in determining whether South Africa can avoid a recession.
While there is a glimmer of hope for economic recovery, concerns persist, with consumer and agribusiness confidence indices collapsing, and challenges like port congestion and power shortages taking a toll on the overall economy and supply chain.
The outcome in the final quarter reflects a nuanced economic picture, balancing positive industrial activity against broader economic challenges.
Obinabo Tochukwu Tabansi is a supply chain mastro and writer with a decade of experience working in different facets of the supply chain. Today he is living his passion for writing on all things supply chain. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the supply chain complexities on the continent.
