Mining production tanks again in February, will weigh on GDP

Mining production tanked again in February, painting a depressing picture for first-quarter industry data with mining and manufacturing starting 2025 on the back foot after a disappointing end to 2024.

According to Statistics SA, mining output is down 6.7% for the three months ending February and will likely weigh on first-quarter gross domestic product (GDP) growth.

Seasonally adjusted mining production slumped by 4.4% in February compared to January, a much bigger decline than the economists at Oxford Economics Africa anticipated. Annual output decreased by 9.6%, partly due to base effects, after the 1.5% decrease in January compared to the same month in 2024.

The largest negative contributors to the annual decline were:

• platinum group metals (PGMs) decreased by -23.9%
• iron ore decreased by -10.5%
• gold decreased by -7.6%
• coal decreased by -4.3%.

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Mining production will affect first quarter GDP

Jee-A van der Linde, senior economist at Oxford Economics Africa, says this suggests that the sector will again weigh on GDP growth for the first quarter of 2025, after contracting by 0.2% in the fourth quarter of 2024 when compared to the third quarter.

This chart shows the downward trend of mining output since the start of the fourth quarter of 2024:

“We anticipate a continuation of anaemic industrial activity over the coming months before things could start to improve. Dwindling mining output suggests miners of precious metals are not fully exploiting lofty gold prices with local miners seldom able to do so, as persistent supply-side constraints undermine their competitiveness,” Van der Linde says.

“The brief return of load shedding in the first quarter has weighed on manufacturers’ sentiment, while the uncertainty about the global economic impact of trade tariffs makes for a gloomier outlook in general.

“We have lowered our 2025 real GDP growth forecast to 1.0% from 1.5% and we now forecast the economy to expand by 1.2% next year.”

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Various factors caused mining production to decrease

Thanda Sithole, senior economist at FNB, also says the February outcome was notably weaker than expectations, surprising to the downside by 5.8 percentage points compared to the Reuters consensus forecast of a 3.8% decline. Excluding gold, mining output fell by an even steeper 10.0%, she points out.

“While the weak performance may partly reflect refurbishment and stocktaking activities, it was further exacerbated by heavy rainfall and flooding that materially disrupted operations. These factors suggest the decline may be temporary, with potential for a rebound in the coming months.”

Sithole says while mining output expanded modestly by 0.4% in 2024, the year-to-date decline of 5.6% remains a concern, particularly in a global environment facing downside risks from potential Trump 2.0 reciprocal tariffs.

“A challenging global trade landscape, subdued commodity prices and slowing growth in China continue to pose significant headwinds for the sector. Nevertheless, ongoing reforms aimed at easing infrastructure constraints, particularly in energy and logistics, should help prevent these from becoming binding limitations on productivity over the longer term.”