SOUTH African mining revenue fell 9,1% in the first quarter, fuelling concern that the sector was further losing its leading position in the economy as it battles high costs and safety stoppages.

The slump signals that the ailing sector is unlikely to make a meaningful contribution to growth this year, analysts said.

Statistics SA (StatsSA) said yesterday mining contributed the most to a decline in the total income of eight South African sectors, to R1,54-trillion in the first quarter, compared to R1,61-trillion in the last quarter of last year - a drop of 4,5%.

The mining sector's contribution to first-quarter economic growth was also negative, according StatsSA's Quarterly Financial Statistics, published yesterday.

Mining and manufacturing account for a large portion of growth and jobs in SA.

The unemployment rate rose to 25,2% in the first quarter, driven by hefty job losses in the manufacturing and construction sectors. With mines closing down and cutting back on expansion, the unemployment rate could accelerate.

Revenue decreased in six of the eight sectors surveyed by StatsSA, including trade and manufacturing. Turnover increased only in real estate and other business services; and in the community, social and personal services sectors (excluding the government).

Slowing demand from SA's main trading partners and weakness in commodity prices are putting huge pressure on mining, with platinum miners currently bearing the brunt.

Vusi Mabena, senior executive for transformation and stakeholder relations at the Chamber of Mines, said the platinum industry may have contributed the most to the decline in mining turnover. He warned more headwinds were on the way for platinum miners.

Mr Mabena pinned hopes for a recovery on a task team established by Mineral Resources Minister Susan Shabangu, on which the chamber and labour are also represented.

"We are busy working ... to look at what can be done to salvage the dire straits in the sector," he said. "The social partners have formed the task team to explore ways of saving jobs and find proper markets for the sustainable sale of platinum. The answers are not out yet, the team is still busy."

Wayne McCurrie, portfolio manager at Momentum Asset Management, said about 40% of platinum miners were producing at a loss, which could force some to reduce production. Aquarius Platinum has already closed its Everest and Marikana operations, citing low demand and prices; and high electricity and labour costs.

"Gold, iron ore and coal miners are still producing and making money, but they are being paid less for it," Mr McCurrie said.

Challenges in the mining sector appeared to be far from resolution in the short term, according to head of research at Imara SP Reid, Steve Meintjies.

He said that lower commodity prices and overproduction would be among factors to watch.

"Safety stoppages are also affecting platinum miners. Platinum is in a tight spot right now."

The global economy is still marred by uncertainty, mainly stemming from the sovereign debt woes of European countries.

Absa Capital expected a combination of weaker global demand, potential strikes and electricity constraints to affect mining and manufacturing.

"We are not forecasting a decline but we're certainly going to see a lesser contribution from these sectors this year," Gina Schoeman, Absa Capital's lead economist on SA, said yesterday.

The future of the mining sector is under discussion at the African National Congress's national policy conference.

Delegates were debating whether a 50% windfall tax on mines should be implemented, as well as export levies on strategic minerals and capital gains tax on the transfer of mineral rights.

Analysts warn these proposals could lead to a flight of much-needed capital in the sector.

maswanganyin@bdfm.co.za