Amid negative commodity demand and continued production at fairly high output levels, commodity prices for the near future will be stable at best and sensitive to any news that might be perceived as negative, such as the slowdown of China’s manufacturing sector and the recent Volkswagen diesel emissions scandal, says consultancy The MSA Group.

The MSA Group adds that low global gross domestic product (GDP) growth numbers with some significant economies such as Canada even experiencing negative GDP growth, translate into low demand for consumer products, which, in turn, means low demand for raw manufacturing commodities.

This results in a significant impact on the South African economy, which has always relied heavily on the mining sector as a strong contributor to GDP and employment.

However, despite a declining contribution from the mining industry, trade economics and Chamber of Mines facts and figures indicate South Africa’s minerals value chain continues to have a foothold in the economy. It accounted for a significant 8.6%, or about R263-billion, of the GDP in 2014 and created over 500 000 jobs and an estimated further 500 000 indirect jobs as the country remains a major supplier of coal, platinum-group metals (PGMs), gold, diamonds, vanadium and manganese

In the first quarter of 2015, the mining sector recorded another increase, reaching 10.2%, or about R240-billion, owing to a boost in coal, metal ores and platinum demand.

However, the second quarter of 2015 resulted in another slump, with the mining sector dropping from R240-billion to R235-billion.

South Africa still holds the largest reserves of gold, PGMs and manganese ore, as well as considerable potential for the discovery of other world-class deposits in areas yet to be exhaustively explored.

However, with the growth of South Africa’s secondary and tertiary industries, which the government has earmarked as growth sectors, as well as a decline in gold production, mining’s contribution to GDP has declined significantly in previous decades from what was once a 21% contribution to GDP back in 1970.