We will get the first of this week’s macroeconomic data releases today, with the June print of SA’s mining production and the Q2 unemployment rate up for release. Over the past two decades, SA’s mining industry has contracted as load shedding, broader infrastructure failure, and a weak economic climate have weighed on the sector. That said, mining remains critically important and represents the key linkage between commodity prices and export strength. In May, weakness in PGMs and gold weighed on the production figure, but experienced some improvement in bulk commodity production, likely owing to further improvement in freight and port inefficiencies. More broadly, mining production is likely to continue along its longer-term trend of stagnation. While the industry stands to see some revival under the newly formed GNU, weak demand from China remains a major risk factor in the near-to-medium term.
Government statistics likely overstate the true unemployment rate in an economy with such a large informal sector. Nevertheless, labour statistics remain an important indicator of direction, whether GNU policies are shifting growth and increasing employment when looking ahead. Expectations are for a lower unemployment print as a struggling labour market has recovered as far as possible from the COVID-19-induced knock and is now reverting to its longer-term structural trend. Tight financing conditions, slow economic growth, and political uncertainty likely limited the degree of hiring activity through the second quarter. With the GNU having now formed and expectations that the SARB will cut interest before year’s end, potentially starting in September, hiring activity may improve. However, amid structural headwinds, firms will require greater conviction that the GNU will deliver on policies to revive growth to ramp up hiring activities.