SA may still have relatively few confirmed coronavirus cases but the flailing economy’s two major foreign exchange earners — mining and tourism — are bracing to take a hit.
China holds a special place in the economy of Africa’s most industrialised country, which slid into recession in the last quarter of 2019.
About 18.5% of SA exports go to China, with mining commodities making up the majority — at around 86% — of total trade with the Asian country.
“Iron ore, manganese and chrome account for two-thirds of SA’s total exports to China by value,” a recent report by Strategy&, a subsidiary of PwC, reads.
With China’s growth expected to slow due to Covid-19, the demand for minerals is also expected to take a knock, potentially affecting commodity prices and costing the industry millions.
Fragile economy
The IMF has forecast a 1% decline in growth in the Chinese economy due to the coronavirus.
“A Chinese economy with a weaker growth pace and slower metals production will have less demand for these minerals from SA. The listed shares of some of the world’s largest mining companies have already been hit by this outlook,” it said.
On average, China imports “about R8.5bn to R9bn monthly”, according to Minerals Council SA economist Tafadzwa Chibanguza.
SA’s economy is already fragile. It slipped into recession in the final three months of 2019, the second contraction to hit the economy in as many years. That contraction was largely blamed on erratic electricity supplies.
The second recession since President Cyril Ramaphosa came to power in 2018 poses more headaches for the reformist leader. The virus “will turn out to be a national crisis” and “it will have a huge impact ... on our economy which as we all know is in a very precarious situation”, he said when the first case was detected last week.
Growth in SA for all of 2019 was just 0.2%, its lowest since the global financial crisis in 2009.
The second-strongest economy in Africa behind Nigeria, SA is the world’s top producer of platinum and a leading supplier of gold, diamonds and other minerals. However, mining has shed about 300,000 jobs in recent years. The unemployment rate is creeping towards 30%.
It is predicted in a report by Trade and Industrial Policy Strategies, a Pretoria-based independent economic research institution, that “if the downturn in China persists or deepens, SA’s mining industry in particular will suffer significant losses”.
On the flip side of the forex cash cows is the tourism industry.
According to the World Travel and Tourism Council, the sector contributes 10% of SA’s GDP, raking in billions of dollars.
China is ranked the seventh-largest origin of foreign visitors to SA with 97,000 tourists holidaying at the country’s game reserves and other sites in 2018.
While it is difficult to quantify the potential impact on the tourism industry as yet, Strategy& has looked at past pandemics such as swine flu, which caused a 15% drop in Chinese arrivals.
SA has so far imposed no travel bans on Chinese visitors, but Beijing has blocked outbound group travel from China.
“Though we have had very few cases of the virus, the local tourism industry has already suffered serious losses,” tourism minister Mmamoloko Kubayi-Ngubane lamented last week.
“Undoubtedly these losses are still going to increase ... the virus will have a negative impact on the tourism sector, at least in the short to medium term.”
The SA fisheries industry was one of the first casualties after China halted animal imports. China traditionally imports 95% of SA rock lobster harvests.
AFP
Pandemic will choke off SA’s biggest money spinners
SA may still have relatively few confirmed coronavirus cases but the flailing economy’s two major foreign exchange earners — mining and tourism — are bracing to take a hit.
China holds a special place in the economy of Africa’s most industrialised country, which slid into recession in the last quarter of 2019.
About 18.5% of SA exports go to China, with mining commodities making up the majority — at around 86% — of total trade with the Asian country.
“Iron ore, manganese and chrome account for two-thirds of SA’s total exports to China by value,” a recent report by Strategy&, a subsidiary of PwC, reads.
With China’s growth expected to slow due to Covid-19, the demand for minerals is also expected to take a knock, potentially affecting commodity prices and costing the industry millions.
Fragile economy
The IMF has forecast a 1% decline in growth in the Chinese economy due to the coronavirus.
“A Chinese economy with a weaker growth pace and slower metals production will have less demand for these minerals from SA. The listed shares of some of the world’s largest mining companies have already been hit by this outlook,” it said.
On average, China imports “about R8.5bn to R9bn monthly”, according to Minerals Council SA economist Tafadzwa Chibanguza.
SA’s economy is already fragile. It slipped into recession in the final three months of 2019, the second contraction to hit the economy in as many years. That contraction was largely blamed on erratic electricity supplies.
The second recession since President Cyril Ramaphosa came to power in 2018 poses more headaches for the reformist leader. The virus “will turn out to be a national crisis” and “it will have a huge impact ... on our economy which as we all know is in a very precarious situation”, he said when the first case was detected last week.
Growth in SA for all of 2019 was just 0.2%, its lowest since the global financial crisis in 2009.
The second-strongest economy in Africa behind Nigeria, SA is the world’s top producer of platinum and a leading supplier of gold, diamonds and other minerals. However, mining has shed about 300,000 jobs in recent years. The unemployment rate is creeping towards 30%.
It is predicted in a report by Trade and Industrial Policy Strategies, a Pretoria-based independent economic research institution, that “if the downturn in China persists or deepens, SA’s mining industry in particular will suffer significant losses”.
On the flip side of the forex cash cows is the tourism industry.
According to the World Travel and Tourism Council, the sector contributes 10% of SA’s GDP, raking in billions of dollars.
China is ranked the seventh-largest origin of foreign visitors to SA with 97,000 tourists holidaying at the country’s game reserves and other sites in 2018.
While it is difficult to quantify the potential impact on the tourism industry as yet, Strategy& has looked at past pandemics such as swine flu, which caused a 15% drop in Chinese arrivals.
SA has so far imposed no travel bans on Chinese visitors, but Beijing has blocked outbound group travel from China.
“Though we have had very few cases of the virus, the local tourism industry has already suffered serious losses,” tourism minister Mmamoloko Kubayi-Ngubane lamented last week.
“Undoubtedly these losses are still going to increase ... the virus will have a negative impact on the tourism sector, at least in the short to medium term.”
The SA fisheries industry was one of the first casualties after China halted animal imports. China traditionally imports 95% of SA rock lobster harvests.
AFP
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