Lockdown blamed for contraction in mining, manufacturing sector

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The COVID-19 pandemic and the nationwide lockdown restrictions have had a negative impact on the mining and manufacturing sector.

Mining production is down by 9.1%, while manufacturing fell by 10.6% compared to the previous year (2019).

Amid the easing of lockdown restrictions in July, mining production showed a continued decrease. Stats SA data shows a decrease of 9.1% year-on-year in July.

The main negative contributors were the non-metallic minerals, coal, iron ore, chromium ore and gold.

The seasonally-adjusted industrial production surged 20.2% after an upwardly revised 1.9% decline in the prior month and 50.5% in May.

According to data from Stats SA, manufacturing seasonally-adjusted production declined by 2.9% in the three months to the end of July, compared to the three months prior.

Four of the 10 manufacturing divisions reported negative growth rates over this period.

GDP impact

Analysts say this is a reflection of the economy during the national lockdown when the country is experiencing low GDP growth.

Ratings agency Moody’s says the recent contraction of the GDP means the country will struggle to bring down its soaring levels of public debt.

South Africa’s debt is set to reach 80% in 2020 due to the impact of the record economic contraction on tax revenues. It’s GDP contracted by an annualised 51 % in the second quarter of 2020.

SA’s economy plunges an annualised 51% in second quarter:

Moody’s says the downturn will intensify government’s fiscal woes, particularly its ability to generate revenue.

Chief Economist at Efficient Group, Dawie Roodt says the expected rebound in economic GDP growth in the third quarter of 2020 will not be enough to turn around the country’s growth picture as the economy recovers from the impact of the nationwide lockdown due to the COVID-19 pandemic.

Roodt says the impact of the nationwide lockdown will be difficult for the economy to recover from.

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