Photo by: Bloomberg
JOHANNESBURG – Mining production decreased by 6.9% year-on-year (y/y) in April 2016, Statistics SA announced on Thursday.
The largest negative contribution was iron ore, of which production was down -23.4%. Seasonally adjusted mining production increased by 2.7% in April compared with March. This followed month-on-month (m/m) changes of -2.6% in March and 2.6% in February.
Seasonally adjusted mining production decreased by 2.4% in the three months ending April 2016 compared with the previous three months. Here too iron ore was the largest negative contributor to the decrease.
Mineral sales decreased by 1.1% y/y in March 2016. The largest negative contributor to the decrease was production of the platinum group metals (PGMs), which was down -17.1%.
On the other hand, gold production was a significant positive contributor - up 23.5%.
Seasonally adjusted mineral sales at current prices decreased by 1.5% in March compared with February. This followed m/m changes of 4.3% in February and -4.2% in January. The low figures add to concerns regarding South Africa's potential to grow, a key criteria that ratings agencies have said will be required to ensure the country doesn't get downgraded to junk status (non-investment grade) at the end of 2016.
News on Wednesday that South Africa recorded a negative growth rate of -1.2% in the first quarter of 2016 was not the news needed to avert an eventual downgrade.
All three ratings agencies kept South Africa above junk status in their most recent review. On Wednesday, ratings agency Fitch affirmed South Africa's investment grade credit, and surprisingly kept its outlook stable. This follows rating reviews by Moody’s in May (which affirmed its ratings at Baa2/P-2 and assigned a negative outlook) and Standard & Poor’s last week Friday (which affirmed its BBB- level with a negative outlook).
However, some economists believe South Africa is already in a recession.
Although a technical recession is described as two successive quarters of economic decline, economist Dawie Roodt told Fin24 in his view South Africa is already in a recession.
"As far as I a concerned we have been in a recession for the past year. The reason is our economy has been growing below the growth levels of our population."
Roodt said South Africa is battling with soaring unemployment and low skills.
"We need to grow the economy's primary sectors such as mining and agriculture in order for unskilled people to work, but both these sectors are in recession," he cautioned.