South Africa’s economy takes a hit

South Africa’s mining and manufacturing output declined in the third quarter of 2023, which indicates that the country’s GDP growth momentum has likely stalled and spells bad news for revenue collection.

Stats SA revealed on Thursday, 9 November, that mining production decreased by 1.9% year-on-year in September 2023. 

Seasonally adjusted mining production decreased by 0.3% month-to-month in September 2023 and 1.6% year-on-year.

Manufacturing production also decreased by 4.3% year-on-year in September 2023.

Seasonally adjusted manufacturing production decreased by 0.5% in September 2023 compared with August 2023. This comes after month-on-month changes of 0.4% in August 2023 and -1.6% in July 2023.

Manufacturing production, therefore, decreased by 1.2% in Q3 2023 compared with Q2, with eight of the ten manufacturing divisions reporting negative growth rates over this period.

Minerals Council SA chief economist Hugo Pienaar said these contractions support the view that South Africa’s real GDP growth momentum has most likely stalled, or at best slowed materially, in Q3.

This comes after the release of third-quarter production data from Kumba Iron Ore. 

For the third quarter, Kumba’s sales declined by 12% compared to the year before. 

The company said its sales were impacted by multiple Transnet equipment failures and adverse weather conditions at Saldanha Bay Port in September, which affected ship loading. 

As a consequence, sales decreased by 12% relative to Q3 2022 and by 6% compared to Q2 2023.

Pienaar said it is notable that these sectors contracted in Q3 despite a 0.7% quarter-on-quarter rise in electricity output.

Finance Minister Enoch Godongwana said in his recent Medium-Term Budget Policy Statement that South Africa faces a tax revenue shortfall of R56.8 billion for 2023.

This is largely due to lower-than-expected corporate tax revenue, mainly from mining and manufacturing companies.

Their contributions to the fiscus were impacted by lower revenues as Transnet and Eskom’s failures weighed on their operations.

It’s estimated that Eskom and Transnet’s failures are contributing to a loss of about R200 billion in revenue collection.