Exports remain robust, despite commodity price slump

Trade data for the first eight months of 2023 has revealed the pressure that South Africa’s mining sector is experiencing, with the year-to-date export revenues for minerals and precious metals declining by 5.4% and 15%, respectively.

According to the latest commodity price report published by the World Bank, a slump in the prices of most metals and minerals commenced in the second quarter of 2022 and there has not been any sign of a turnaround, mainly due to slow world growth and structural deficiencies being experienced in the Chinese economy. Compared to the recent highs recorded last year, the prices of coal, iron ore and platinum had dropped by 67%, 20% and 12% at the end of September.

The regression in the performance of mining companies has also been documented in the latest annual mining sector overview by professional services firm PwC. Apart from lower commodity prices, local mining companies have also been confronted by significantly higher input costs, especially for energy, whilst transport infrastructure remains a vexed problem.

Despite arduous challenges facing the mining sector, overall production has only dropped by 5.4% over the past year, with the bulk of mining companies still generating sufficient profits to pay dividends to their shareholders.

Trade balance surplus retained

Fortunately for South Africa’s balance of payments, the R64 billion loss of export earnings from the mining sector during the first eight months of the year was more than covered by a sterling performance from the other three major export groups, namely agriculture & food, vehicles, and metals.

These three generated R69 billion more in exports than between January and August last year, which played a decisive role in South Africa maintaining its proud trade surplus record of the past three-and-a-half years. Until June, the prospects for another trade balance surplus were fast diminishing, but thanks to bumper export earnings in July and August, the year-to-date surplus has swelled to R33 billion.