[Ferro-Alloys.com] A newly released report by Trade and Industrial Policy Strategies (TIPS) warns that South Africa’s mining industry could suffer “significant losses” should the coronavirus, or Covid-19, not be contained in the short term, which the authors defined as being by April 2020.

In a policy brief, TIPS economists Nokwanda Maseko, Rhulani Hobyani and Neva Makgetla state that various industries are already feeling the impact of Covid-19, with West Coast rock lobster exports having fallen as a result of China halting animal imports.

The authors also warn that there is a risk that the consequences could worsen significantly, with the worst-case scenario being global recession, which would negatively impact South Africa and South African natural resource exports.

The report’s release coincided with confirmation that South Africa had officially re-entered a recession, following a 1.4% contraction in gross domestic product (GDP) during the fourth quarter of 2019.

The International Monetary Fund estimates that a 1% decline in Chinese growth could reduce South Africa’s GDP to 1%, while the South Africa Reserve Bank has estimated that South Africa’s growth could fall by 1.2% should the Chinese economy contract by 1%.

The TIPS report stresses that the ultimate extent of the Covid-19 epidemic remains unclear, but that the outbreak has already exposed South Africa’s dependency on China for both trade and production, with some South African exports already feeling the effects of the crisis.

“If the downturn in China persists or deepens, South Africa’s mining industry in particular will suffer significant losses, with an impact on workers and communities as well as companies.”

The majority of South Africa’s top ten exports to China, which account for about 86% of South Africa’s total exports to China, as can be seen in the table, are from the mining industry.

The list includes iron-ore, manganese, chromium, ferrochrome, zirconium, copper and lead. It also includes wool and chemical wood pulp.

“Although the extent of the impact on exports is not clear yet, analysts suggest that demand for iron-ore and steel will decline.”

In 2019, South Africa’s most important export to China was iron-ore, valued at R30-billion and up from R20.1-billion in the previous year.

The TIPS report also cautions that negative impact on the Chinese economy has the potential to halt production lines in other countries.

Most of the R235-billion in imports from China in 2019 arose in the form of consumer goods and intermediate inputs for manufacturing.

“China is South Africa’s largest supplier of eight of the top ten import items, with consumer electronics, such as cellphones and laptops, exceeding 80%.”

The authors said that the initial overview points to the importance of stronger contingency planning to deal with the economic effects of the virus.

“In the absence of clear plans to support affected businesses, the likely result will be a further slowdown in growth as well as substantial job losses and closures especially of smaller, more informal businesses.”

• [Editor:tianyawei]