South Africa’s mining output, which accounted for as much as a fifth of gross domestic product (GDP) in 1980, slumped dramatically in February, falling 9.6% year-on-year and now likely accounts for less than 6% of the economy.
Thanda Sithole, FNB Senior Economist, said that this decline was worse than expected and this pointed to a weak contribution to first quarter GDP from the sector.
This decline was, according to a Statistics South Africa print issued on Tuesday, primarily due to lower platinum group metal (PGM) production, followed by iron ore and then gold.
“While the weak performance may partly reflect refurbishment and stocktaking activities, it was further exacerbated by heavy rainfall and flooding that materially disrupted operations. These factors suggest the decline may be temporary, with potential for a rebound in the coming months,” said Sithole.
Yet, Investec economist Lara Hodes said that “heightened uncertainty globally due to continued geopolitical tensions and the disruptive trade war remains a key risk to global growth and demand for essential commodities, weighing on South Africa’s export potential.”
In January 2025, mining production shrank by 2.7% year-on-year, which follows a 2.4% decrease in December last year. Trading Economics stated that this was part of a three-month downward trend and the steepest contraction since June 2024.
“The historical cornerstone of the economy, especially Gauteng, is in decline. It’s obviously not good for employment,” said Dr Azar Jammine, director and chief economist at Econometrix.
Mining accounted for around 6.3% of GDP in 2023, a figure that declined to 6% in the first three quarters of 2024 according to the Minerals Council of South Africa. Statista figures stated that, in 2023, the mining trade provided direct employment to almost half a million people, the bulk of which were employed in the PGM sector.
The Minerals Council is concerned that, on the back of tariffs that will crimp automotive demand in the United States, PGM demand will fall given its use in catalytic converters.
PGMs, coal, gold, manganese and chrome are specifically excluded from US President Donald Trump’s tariffs, although iron ore and diamonds will be subject to the initially announced 30% import tax before Trump walked this back to 10%.
Mineral sales also declined, with iron ore dropping the most in terms of overall contribution, followed by gold.
Gold saw sales drop 32.7% despite the yellow metal’s record high early on Monday of $3 245.42, according to Reuters. The newswire stated that Goldman Sachs has raised its forecast price for the end of the year to $3 700 an ounce.
Invest SA’s data indicates that local mineral reserves are among the most valuable in the world. “South Africa has the world’s largest reserves of PGMs and manganese, and some of the largest gold, diamonds, chromite ore and vanadium deposits,” it recorded on its website.
A Statistics South Africa summary of mining history noted that mining’s contribution to total economic production climbed in the 1970s to peak at 21% in 1980. “Contributing to the upward surge in 1980 was a relatively high gold price,” it said.
Manufacturing was the largest industry in 1980, falling to fourth place in 2016.
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