Political deadlock grounds mining sector

  • by African Times
  • 9 Months ago
  • 0

SAVIOUS KWINIKA

THE mining industry in South Africa, the continent’s most advanced economy, is bearing the brunt of policy uncertainty and the prevailing political impasse.

These factors are projected to hamper the recovery of the industry, whose performance has declined over the past year, according to figures released by Statistics South Africa recently.

Growth in mining production slowed to 0,1 percent year on year (y-o-y) in December from 6,5 percent in November. The easing was mainly as a result of declines in the production of gold, copper, platinum group metals as well as coal.

On a seasonally adjusted basis, mining production declined by 3,1 percent month on month (m-o-m) in December and was down 1,7 percent quarter on quarter (q-o-q) over the fourth quarter.

Nedbank economists, Dennis Dyke and Busisiwe Radebe, pointed out mining figures were volatile but stronger global demand and firmer international commodity prices were expected to support production and exports in 2018. “The upside will still be tempered by a generally difficult operating environment and policy uncertainty,” the Nedbank economists said.

Nedbank believes the interest outlook for 2018 remains uncertain given that much will depend on the trajectory of the rand, which in turn will depend on the policy environment.

“A quick resolution to the current political impasse will confirm the recent rand strength, and so lower inflation, and lead to one or possibly two rate cuts in the first half of the year,” Dyke and Radebe stated.

Nedbank’s forecast is for interest rates to remain unchanged throughout 2018, before increasing by 25 basis points each in September 2019 and January 2020. The bank’s sentiments came as political uncertainty gripped the country, whose president, Jacob Zuma, is under pressure to quit.

The country looks forward to newly elected African National Congress (ANC) President Cyril Ramaphosa, expected to takeover reins from Zuma. Zuma’s tenure since 2009 has been marred by corruption allegations and economic decline.

Meanwhile, First National Bank (FNB) projected mining, which contributes about 10 percent to gross domestic product (GDP), to regain momentum in the first half of the current year given strong Chinese demand particularly for iron ore but also urged for clarity in policies.

“Commodity prices also remain supportive and we expect 2018 to deliver another year of growth, particularly if a resolution is found to the mining charter impasse and industry investment takes off,” FNB stated. – CAJ News

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