Government’s optimism over mining outlook ‘misplaced’

“The fall in commodity prices is of major concern given that South Africa is a commodity exporter,” says First National Bank trade economist Lizanne Case. “With commodity prices as well as export volumes decreasing dramatically from the third quarter of 2008, the impact on our terms of trade and by implication on national income is significant,” she told FTW. She notes that gold has devalued from a high of US$1 000 to around US$700. Platinum has devalued by more than 50% from a high of US$2 300 to somewhere around $800 and aluminium prices have devalued by 40%. The JSE’s resources index has lost 31% this year. “That the mining industry is facing difficulties is a fact but it is not only a function of falling commodity prices in this uncertain global economy. It is also impacted by domestic conditions such as electricity shortages and safety issues in South Africa’s mines which are further exacerbating the problem and impeding output. “I read an article recently that said that the government remains optimistic for mining exports in the medium term given that commodity prices are still relatively high and will be supported by demand from Asia. But in this uncertain global climate, with most of the world’s key economies in or approaching recession, declining demand for motor vehicles and components, I’m not sure if I share their optimism,” Case concludes.