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Frederick Mitchell
November 15, 2024

Manufacturing Production and Sales

September 2024

South Africa’s mining production increased by 4.7% in September 2024, primarily driven by iron ore, PGMs, and manganese. Mineral sales rose 8.0%, led by significant gains in manganese and gold. Despite challenges in electricity supply and infrastructure, the sector is rebounding, supported by improved economic confidence.

Mining production in South Africa rose by 4.7% in September 2024, building on a modest 0.3% increase in August. Key contributors to this growth included:

  • Iron ore: up 10.0%, adding 1.3 percentage points
  • Platinum Group Metals (PGMs): up 6.7%, contributing 2.1 percentage points
  • Manganese: up 13.5%, contributing 0.9 percentage points
  • Diamonds: up 35.4%, adding 0.5 percentage points
  • Chromium ore: up 17.3%, contributing 0.8 percentage points

However, coal production declined by 4.4%, reducing growth by 1.0 percentage points, while gold production fell by 3.7%, leading to an overall reduction of 0.5 percentage points in mining production.

In September 2024, mineral sales increased by 8.0%, rebounding from a 10.7% decrease in August. Significant sales increases included:

  • Manganese ore: surged 48.3%, boosting performance by 5.1 percentage points
  • Chromium ore: increased by 19.4%, adding 1.5 percentage points
  • Coal: up 5.9%, contributing 1.5 percentage points
  • Gold: increased by 42.3%, adding another 5.1 percentage points

Despite these gains, PGMs experienced a significant decline in sales, dropping 15.9% and reducing total mineral sales value by 4.3 percentage points.

The mining sector remains vital to South Africa’s economy, driving foreign exchange and employing approximately 484,000 people directly, according to StatsSA data. After facing serious challenges from late 2022 to 2023—stemming from electricity supply issues and infrastructure bottlenecks, particularly at ports—production volumes have begun to recover in early 2024 and again in September following a slump from April to August.

The sector appears to be rebounding from a low base, supported by improved economic confidence following the still recent general elections and enhanced electricity availability. Looking ahead, mining production is expected to stabilise and grow moderately over the coming months due to increased confidence in the sector. However, mining firms remain cautiously optimistic about maintaining consistent electricity supply and resolving infrastructure challenges in the medium term, as promised by the Government of National Unity

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Gross Operating Surplus

Company is crucial for investors and the government, influencing investment potential and tax revenue. The latest data from Statistics South Africa shows a 2.9% quarterly decrease in Gross Operating Surplus (GOS) but a 4.5% annual increase, indicating profitability growth. Notably, sectors like mining and transport exceeded inflation rates, signaling positive market sentiment and potential for increased investment in South Africa over the medium to long term.

South African Economic Performance

South’s economy unexpectedly contracted by 0.3% in Q3 2024, with six out of ten sectors growing. The agricultural sector significantly declined by 28.8%. Positively, manufacturing and finance showed growth, contributing to overall resilience. However, consumer demand and elevated prices in the economy remain concerns, while expected growth for 2024 is estimated at just 0.7%. Addressing policy clarity and structural reforms could enhance business confidence and stimulate growth.

Private Sector Credit Extension (PSCE)

In October 2024, credit extended by South African financial institutions rose by 4.3%, with increasing demand in most categories, despite remaining low overall. Recent interest rate cuts totaling 50 basis points may enhance property and fixed asset purchases in 2025 as consumers gain more disposable income, potentially boosting overall demand.

Producer Price Inflation

Producer Price Inflation in South Africa saw a deflation of 0.7% in October 2024, exceeding analysts’ expectations. This decline was driven by significant price drops in coke, petroleum, and related products. While overall inflation may remain low in the short term, rising costs for intermediate goods and administered prices raise concerns. Persistently low inflation could lead to interest rate cuts, potentially boosting consumer and business demand in 2025.

Another 25 Basis Point Interest Rate Cut

The South African Reserve Bank cut the interest rate by 25 basis points, contrary to some expectations for a larger reduction. Inflation remains within the target range of 3% to 6%, and positive signs for growth include rising confidence and stable electricity supply. Despite subdued manufacturing production, increased disposable income supports demand, contributing to a gradual economic recovery.
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