A policy brief released by South African research institution Trade and Industrial Policy Strategies (TIPS) has warned that South Africa’s mining industry could see “significant losses” if the Covid-19 outbreak cannot be contained by April 2020.
China is South Africa’s largest supplier of imports and its biggest buyer of exports, and there are fears a downturn in China could have a knock-on effect for South Africa’s economy.
The report identifies the top 10 exports to China from South Africa, most of which are commodities produced by South African miners. Agglomerated iron ores and concentrates formed South Africa’s most important export to the Chinese market, valued at R30bn ($1.95bn) in 2019. Manganese ores and concentrates are second, valued at R29.6bn ($1.92bn). Roughly 65% of manganese ores and concentrates produced in South Africa are exported to China.
Decreased demand for raw materials in Chinese manufacturing following the Covid-19 outbreak has led to widespread uncertainty throughout the mining industry.
A decline in the Chinese economy due to the epidemic could have detrimental effects around the globe, and, in the worst-case scenario, a significant economic hit in the world’s largest economy could trigger a global recession.
South Africa’s economy shrank by 1.4% in the fourth quarter of last year, and the South Africa Reserve Bank has estimated that South Africa’s economic growth could fall a further 1.2% if the Chinese economy contracts by just 1%.
“If the downturn in China persists or deepens, South Africa’s mining industry, in particular, will suffer significant losses, with an impact on workers and communities as well as companies,” the authors of the report said.
The report advised that South African authorities need to strengthen contingency planning to support affected business, and warned there could be a further slowdown in growth, as well as significant job losses if proper plans are not implemented.