Mining’s Iron Grip on the South African Economy (Reuters)
South Africa’s economy, for all its sophistication and market liquidity, is still typical of Africa with a heavy exposure to natural resources according to a lengthy analysis by Reuters (Mining retains iron grip on South African economy).
Mining only accounts for 5.1% of South Africa’s GDP (down from a peak of almost 20% in 1980 when the country was the world’s top gold producer and bullion’s price was sky-rocketing); but because the overall South African economy has been expanding so sluggishly, the sector’s almost 25% plunge in output in the first quarter on an annualized basis (the steepest contraction in almost half a century in the wake of crippling strikes) is dragging down the rest of the economy with it.
Christie Viljoen of NKC Independent Economists was quoted by Reuters as saying:
“Because our economy is diversified we often forget how dependent we still are on mining commodities. It still represents more than half of export revenues, which is shocking. The government’s big focus is on manufacturing, that’s where it sees the jobs and the exports. But if you look at how important mining exports still are it raises big questions about their success in diversifying exports.”
Moreover, a recession now seems certain as the strike by members of the Association of Mineworkers and Construction Union (AMCU) against producers Anglo American Platinum, Impala Platinum and Lonmin continues (see South Africa’s Broken Mining Labor Model (BD))
The mining strike along with South Africa continued dependence on the mining sector (something that has caused me to avoid investing in the country) would certainly be of interest to any foreign investors who hold shares of the following South Africa ETFs or mining stocks:
- iShares MSCI South Africa Index ETF (NYSEARCA: EZA)
- AngloGold Ashanti Limited (NYSE: AU)
- Gold Fields Limited (NYSE: GFI)
- Harmony Gold Mining Co. (NYSE: HMY)
- Sibanye Gold Ltd (NYSE: SBGL)
To read the whole article, Mining retains iron grip on South African economy, go to the website of Reuters Africa.
- South African Gold Mines “Would Not Weather Strike” (BusinessDay)
- South Africa Stocks “Expensive Within Emerging Markets” (Moneyweb.co.za)
- South Africa’s Broken Mining Labor Model (BD)
- How Big is Africa’s Car Market? (African Executive)
- Moody’s Downgrades South Africa Banks, Insurance Companies and Others (Moody’s)
- China’s Gung-ho Foray Into Africa Gets a Reality Check (Bloomberg)
- South Africa Mining Sector Faces Unrest and Other Woes (BusinessReport)
- S&P South Africa Downgrade Excerpt (Rand Daily Mail)
- South Africa’s Economic and Potential Downgrade Woes (Bloomberg)
- Naspers’ Tencent Stake Drives the MSCI South Africa Index’s Returns (KraneShares)