South Africa’s Gold Sector Declines Despite Record Prices
Despite record-high gold prices, South Africa’s gold sector continues to experience a “deep structural decline,” according to Hugo Pienaar, chief economist at the Minerals Council.
Reviewing the latest mining production and sales data from Stats SA for the second quarter of 2024, Pienaar highlighted the ongoing challenges in the industry.
Since the fourth quarter of 2019, only manganese and chrome have shown growth, while overall mining production in the second quarter of 2024 was 8.7% lower than pre-COVID levels. Iron ore and gold have been the worst performers, with the gold sector unable to capitalize on the soaring nominal prices.
Pienaar noted that logistical issues, particularly a significant maintenance backlog in Transnet’s railways, have contributed to weaknesses in iron ore and coal production.
Additionally, the sustained low prices of platinum group metals (PGMs) have led to reduced production, reflected in a 0.7% year-on-year decline in the total value of mineral sales for the first half of 2024.
While the mining sector has not faced load-curtailment recently, Pienaar cautioned that other constraints, such as rail and port issues, as well as unfavorable commodity prices, are dampening the benefits.
He predicted that overall mining production would likely remain subdued in the near future, impacting South Africa’s GDP growth.
Stats SA reported a 0.9% quarter-on-quarter decline in total mining production for the second quarter of 2024, following a 1.3% contraction in the first quarter.
Pienaar expressed disappointment, noting that the sector’s continued decline comes despite an improvement in electricity generation, which increased by just over 2% in real terms during the same period.
