Mining slump affects South African economy

<p>The South African economy shrank by 0.6 per cent in Q1.</p>

A slump in mining activity has hurt the South African economy, which contracted during the first three months of the year.

Official data for the country's economy showed a slump of 0.6 per cent between January and March, with a slowdown in the nation's mining sector among the reasons for the drop.

Gold, diamond and platinum mining were all down and, as this is one of South Africa's most important industries, this had a major impact on the strength of the country's economy.

Razia Khan at Standard Chartered Bank told BBC News that the statistics for the nation's economic growth in the first three months of 2014 make for "grim reading".

He said: "Mining, hit by protracted industrial unrest, fell almost 25 per cent on an annualised basis. Manufacturing was down 4.4 per cent."

Platinum mining has been on hold in South Africa for the last five months as workers have gone on strike over pay and conditions. In turn, this has had an impact on the mining industry across the country and investors will be keeping a close eye on the price of precious metals in the near future to see if the strike action has an effect on the value of the commodities.

Strike talks

New South African mining minister Ngoako Ramatlhodi recently told Johannesburg's Talk Radio 702 that talks over a break in the platinum miners strike have broken down. He explained that discussions held between platinum mining companies and the striking Association of Mineworkers and Construction Union (AMCU) union came to a stop yesterday (May 27th), reports Reuters.

"The economy is almost knocking at the door of a recession and we should not allow that to happen to ourselves," he said. "The AMCU president has assured me they are doing everything possible to reach an agreement with the mining houses. South Africans are very reasonable people. I've no doubt that they'll find a solution."

Following the release of the official data for the South African economy in Q1 2014, the rand was down by about one per cent against the dollar to 10.44 rand.

High unemployment has had a stifling impact on the state of the South African economy in the last few years, with around 25 per cent of the nation's population currently looking for work.

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