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[Ferro-Alloys.com]MINING production plummeted in February compared with a year ago, and economists have warned that a strike would bring the struggling sector to its knees.
The sector, a major contributor to economic output, is under pressure from rising input prices, weak demand and low global commodity prices.
Mining output contracted sharply by 8.7% in February compared with a year ago after a 5.5% contraction in January, Statistics SA data showed on Thursday. The decline was the largest contraction since December 2012, when mining production fell 9.2% due to a strike in Marikana.
With mineworkers heading for wage talks in a few months, and given a history of protracted strikes in the sector, there are concerns a strike would add to the sector’s woes and curb economic growth.
"A strike would provide yet another damaging blow to the sector, which is still struggling to recover from the crippling industrial action that brought it to a standstill in 2014, and further jeopardise the already highly fragile state of employment in the industry this year," BNP Paribas Securities economist Jeff Schultz said.
The mining and quarrying sector shed 14,000 jobs to 462,000 workers in the fourth quarter last year, according to Stats SA data.
Many mining firms had indicated that they intended to shed jobs this year, a move that would anger SA’s "often combative" labour unions, said Capital Economics Africa economist John Ashbourne.
Wage demands would likely increase as inflation picked up, he said.
Mining and manufacturing together account for just more than 20% of gross domestic product (GDP), and so, output in these sectors is an important indicator of economic growth.
Other sectors, such as retail, were still showing stronger growth compared to mining and manufacturing, which should still support growth, economists said.
Capital Economics’ GDP tracker, which estimates economic growth based on incoming data, suggested that the domestic economy had just managed to eke out positive growth in February, and that growth would probably be positive, but very weak in the first quarter.
The outlook for the mining sector for this year remained poor, Nedbank economist Busisiwe Radebe said.
Global conditions, especially in China, the biggest export market for SA’s mining industry, lower commodity prices, weak demand and possible labour instability would possibly contain mining output growth, she said.
The main negative contributors to the decrease in production were iron ore, platinum group metals and manganese ore.
Production declines were offset by higher gold output, Stats SA said.
Mineral sales fell 1.5% year on year in January, with the largest negative contributors being iron ore, manganese ore and chromium ore.
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