South African Mining, Manufacturing Output Show Mixed Signals in October 2024

South Africa’s mining and manufacturing sectors showed signs of resilience in October, despite mixed performance figures that signal a challenging economic environment. Mining output grew by 1.4% year-on-year (y/y) in October, a marked slowdown from the 4.9% recorded in September.

Meanwhile, manufacturing output increased by 0.8% y/y, surpassing market expectations. These results highlight ongoing sectoral disparities that will influence both South Africa’s economic trajectory and its role in global markets in the final quarter of 2024.

The mining sector’s performance was a tale of contrasting figures. Overall, mining output grew by 1.4% y/y in October, though this was significantly lower than the revised 4.9% growth in September.

Despite this deceleration, year-to-date growth (January to October) stands at a modest 1.0%, an improvement over the flat growth seen in 2023. Key contributors included robust performances in platinum group metals (PGMs), coal, and manganese ore.

However, the sector faced challenges, with iron ore output falling 6.4% y/y and gold continuing its downward trend with a 3.4% decline. Seasonally adjusted, mining output contracted by 3.0% month-on-month (m/m), signaling a weak start to Q4 2024.

Thanda Sithole, Senior Economist at FNB, pointed out that the mining sector’s weak m/m performance could dampen South Africa’s fourth-quarter GDP growth.

“Although the year-on-year figure for October was positive, the contraction in seasonally adjusted output signals underlying vulnerability, especially as global demand for key minerals remains subdued,” said Sithole. “Looking ahead, we expect moderate growth, with significant improvements contingent upon infrastructure reforms.”

While the global demand for PGMs and coal remains stable, challenges like constrained energy supply and logistics inefficiencies are hindering the sector’s ability to maximize production. The ongoing effort to overhaul port and rail infrastructure could offer a pathway to greater profitability, but short-term growth prospects remain moderate.

In manufacturing, the sector’s rebound, with a 0.8% y/y increase in October, signals a slight recovery from September’s revised contraction of 1.4%. On a seasonally adjusted basis, manufacturing output rose 0.4% m/m, a positive indicator for the start of Q4.

Key growth drivers included petroleum, chemical products, and food and beverage manufacturing, which posted 4.5% and 2.9% y/y increases, respectively.

However, the motor vehicles and transport equipment sector remain a significant drag on overall performance, with a continued decline of 16.6% y/y in October, exacerbating the ongoing year-to-date drop of 8.9% in motor vehicle production.

“The manufacturing sector’s performance continues to be under pressure from weak domestic demand and a challenging global environment,” Sithole noted.

“However, the slight improvement in output and the rebound in some key sectors suggest the economy is gradually recovering, supported by easing energy constraints and more favorable input costs.”

Despite the mixed performance, the manufacturing PMI’s expected business conditions index remains optimistic at 62.3 points, suggesting that manufacturers foresee modest improvements in the near future.

“A gradual recovery is anticipated, particularly as global growth stabilizes and private sector investment picks up,” Sithole added.

The continued underperformance in the motor vehicle sector reflects broader structural issues, including supply chain disruptions and declining domestic demand.

Nevertheless, the growth in chemical products and food production hints at a diversification in the manufacturing base, offering some hope for a sustained recovery in the coming months.

Both sectors face an uphill battle as South Africa grapples with weak external demand and internal challenges. The outlook for Q4 2024 remains mixed, but both mining and manufacturing offer potential for moderate recovery if infrastructure improvements and global economic conditions stabilize.

The coming months will be critical for determining whether these sectors can break through their current constraints and contribute more substantially to South Africa’s economic growth and export potential.

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