Data published yesterday showed the mining sector continued its weak performance, contracting -1.4% y/y in July. Economists, according to Bloomberg’s median forecast, were anticipating an uptick for the period of +1.3% y/y. July’s data also represents a -0.9% contraction compared to the seasonally adjusted data in May. The softer-than-expected data was largely due to a -19% dip in the production of iron ore. The latest mining output print reiterates that the mining industry’s constraints extend much further than just load-shedding (which has been suspended since the end of March). Decades of policy uncertainty, restrictive labour laws, red tape and logistical headwinds have eroded the industry’s ability to operate at full potential.
On the topic of mining, a significant overnight development impacting South Africa is the sharp rally in gold markets, with bullion climbing to $2,568 per ounce. This is positive news for gold-producing nations and could further improve South Africa’s terms of trade. Coupled with the recent decline in oil prices (despite a slight rebound over the last two days), these factors are likely to support the ZAR’s continued strength as we approach the weekend. Additionally, it positions the ZAR favourably ahead of next week’s FOMC and SARB meetings, which may influence the currency’s broader trajectory toward the end of the year.