Mining output (not seasonally adjusted) contracted by 2.6% y/y in March, reflecting an improvement from a materially downwardly revised 7.6% y/y contraction (previously 5.0% y/y contraction) in February.
The outturn was better than the Bloomberg consensus prediction of a 7.3% y/y decline. Nevertheless, the annual decline in mining output has been persistent for fourteen straight months, mirroring the material impact of idiosyncratic structural bottlenecks.
Surprisingly, seasonally adjusted mining output increased by a robust 6.5% m/m in March, following a material decline of 7.0% m/m (downwardly revised from the 4.9% m/m decline) in the prior month.
While mining output for March is encouraging, we are concerned about the wide retrospective revisions causing economic forecast volatility.
That being said, output grew by 1.0% q/q in 1Q23, following a 3.4% quarterly decline in 4Q22, and likely contributed to 1Q23 real GDP growth.
This is despite intensified load- shedding between 1Q23 and 4Q22 and counteracts the negative contributions from new vehicle sales and electricity generation.
We will provide our final estimate for 1Q23 real GDP growth once the rest of the high-frequency data is available over the next two weeks.
Outlook
Year-to-date (January to March), total mining output is down by 4.1%, dragged down by poor performance in key mining divisions, namely platinum group metals and coal. We maintain our view of a decline in aggregate mining output this year, after the sector's Gross Value Added declined by 7.0% in 2022. The extent of the decline is likely to be shallower, at around 2.5%, following the already sharp decline in 2022. While the prices of most of SA's major export commodities have moderated amid slowing global growth, idiosyncratic factors such as intensified load-shedding, transport and logistics challenges, as well as elevated input costs (including the cost of load-shedding) are expected to weigh heavily on production and export volumes. Over the medium term, we expect industries implementing measures like electricity self-generation to mitigate the impact of load-shedding, which should support a recovery in output.
Selected sector analysis
The annual decline in mining output was broad-based, with nine out of twelve divisions falling. Amongst the major divisions (i.e., coal, platinum group metals, gold, iron ore and manganese ore, which together account for 85% of total mining), the most significant negative contribution emanated from platinum group metals which declined by 9.1% y/y (and 3.7% m/m seasonally adjusted) in March, following growth of 2.8% y/y (and 6.8% m/m) in the previous month. Coal production declined by 1.8% y/y but grew by 5.6% m/m, and iron ore production declined by 0.9% y/y but grew strongly by 13.9% m/m. Gold production was up 21.6% y/y and 9.5% m/m, while manganese ore production was up 23.1% y/y and 25.8% m/m.
