Persisting decline in mining production signals trouble for South Africa’s economy

The South African mining sector, characterised by its energy-intensive nature, is facing numerous challenges that threaten its export potential and overall viability.

Data from Statistics South Africa (Stats SA) on Thursday showed that mining production shrank by 2.8% year-on-year in March following a 9.7% plunge in February.

The latest reading pointed to the fifth consecutive month of annual decline in the sector, although much softer than in February, it will drag economic growth in the first quarter of 2025 as the March mining release concluded the results for the first three months of the calendar year.

Jean-Pierre Terblanche, principal service statistician at Stats SA, said four out of 12 mining divisions recorded annual declines in March, but platinum group metals (PGM) and gold were the largest negative contributors. 

“Seasonally-adjusted mining production declined by 4.5% in the first quarter of 2025 compared with the fourth quarter of 2024,” Terblanche said.

“A decline in platinum group metals was the biggest drag on overall growth, declining by 13.7%. Nickel, copper, chromium ore,coal and gold also performed poorly in the first quarter.”

On a seasonally adjusted monthly basis, mining output rose 3.5% in March, after a revised 4.1% decline in the previous month. 

This downturn coincides with ongoing struggles in the manufacturing sector, which is on its eighth consecutive month of annual contraction. Manufacturing production plunged by 2.3% in the first quarter of 2025, exacerbating economic challenges as the unemployment rate simultaneously increased to 32.9%.

Investec economist Lara Hodes said the sector was expected to detract from the quarter’s gross domestic product (GDP) reading.

Hodes pointed out that the Minerals Council South Africa recently flagged electricity pricing as an ongoing challenge for mining companies, saying the cost of electricity affected not just profitability but the overall sustainability of many operations.

“Global factors have weighed on the export potential of the energy-intensive domestic mining sector and it continues to contend with rising electricity prices. According to the Minerals Council South Africa, “the cost of electricity remains a serious constraint”. Eskom lifted its tariffs by a further 12.7% this year,” Hodes said.

“Moreover, logistics impediments are ongoing, weighing on activity, especially on the “bulk commodity side”. While “overarching regulations” and other red-tape “contribute to constraints and bottlenecks”.

FNB senior economist, Thanda Sithole, concurred that the first quarter's GDP growth was likely to be lower than the previous quarter. 

Sithole said the shrinking in mining output, together with the quarterly weakness recorded in the manufacturing and electricity sectors, posed a downside risk to the first quarter GDP growth estimate.

He said the remaining high-frequency data to be published over the next two weeks will give a clearer picture of how the economy performed in the first quarter.

“At this stage, we pencil in 0.2% quarterly GDP growth for 1Q25, which is lower than the 0.6% quarterly growth recorded in the fourth quarter of 2024,” Sithole said.

“Near-term mining activity remains challenged by slowing global growth and lingering global uncertainty. While output increased slightly by 0.4% in 2024, the year-to-date performance has been disappointing, with output down by 4.7% in the first three months compared to the corresponding period last year.

“This suggests that the mining sector’s contribution to 2025 GDP growth will be negligible or even negative. The medium-term outlook should be underpinned by ongoing infrastructure reforms, particularly in energy and logistics.”

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