A dismal start to the year in 2018, when the value of mineral sales for January and February declined by 3.2% (year on year), the fortunes of the country’s mining industry changed dramatically, with increases of 14.4% and 20.8% in the first two months of 2019 and 2020, respectively. The local mining sector clearly ignored the “year of the pandemic”. Mineral sales have become even more rampant, with a further increase of more than 25% over the 2020 figure. To put the value of mineral sales of R120 billion during January and February into perspective, it is equal to the total output of the agricultural sector in 2020. A direct consequence of the sterling performance of the mining sector is a handsome cumulative trade surplus for January and February, namely more than R41 billion. An indirect consequence that has an important bearing on the future direction of monetary policy is the impact on the value of the rand exchange rate.
Exporters are probably frustrated at the sustained (albeit volatile) strengthening of the rand/US dollar exchange rate since April 2020, importers and consumers are enjoying a field day, with inflation remaining in check and dipping below the bottom end of the Reserve Bank’s target range for the consumer price index (CPI) in February. A strong rand, which is also assuming a measure of stability of late, essentially obviates any fears over a rise in the repo rate (and, by inference, the prime overdraft rate), which is good news for consumers, businesses wishing to expand their capacity and venture capitalists. Ultimately, it also favors employment creation and a broadening of the taxation base. The executive leadership at the South African Revenue Service will therefore be most pleased with the way that mineral sales have kicked off the New Year.