The production data for mining and manufacturing were both released on Thursday. Mining production for December only increased 0.1% year-on-year, while manufacturing production increased 2% in December.
The main contributors to the slower growth for mining in December were gold, down 12.4% year-on-year, and coal, down 5.5% year-on-year. Other metals which contracted include copper and platinum group metals. The only positive contributor to production was iron ore, up 15.9%.
Mining is expected to make a “solid contribution” to annual GDP, said FNB senior economic analyst Jason Muscat.
“We expect the sector to regain momentum in the first half of 2018 given strong Chinese demand, particularly for iron-ore.
“Commodity prices also remain supportive and we expect 2018 to deliver another year of mild growth,” he said.
Analysts who attended the 2018 African Mining Indaba have positive expectations for the sector in 2018. Theuns Ehlers, managing principal and head of resource and project finance at ABSA Corporate Investment Banking told Fin24 that there is an uptick in new capital developments in the industry.
“Some of the mining companies are spending money again, which was not the case 12- to 18 months ago.” This has been helped by a recovery in commodities. “We see a recovery in commodity prices. From a profit margin perspective, the commodity cycle is in a much better space,” he said.
Upbeat manufacturing data
Manufacturing production had grown for the third-consecutive month in December, according to Stats SA’s report. In November production was up 1.5% and in October it grew by 2.1%. However, in 2017, total manufacturing production decreased by 0.5%. Muscat highlighted that the December growth comes off a low base.
The main drivers of growth were the manufacturing of food and beverages, petroleum, basic iron and steel, and motor vehicles and parts. There was a decline in clothing and wood manufacturing.
“While a welcome end to the year, the industry remains exposed to weak domestic demand and a lack of export competitiveness… We expect a slightly better year for the industry in 2018 as domestic demand begins to recover,” he said.