Following the larger-than-expected 3.7% year-on-year contraction in manufacturing output for May, Steel and Engineering Industries Federation of South Africa (Seifsa) chief economist Henk Langenhoven cautioned that there was “a real danger” that the metals and engineering strike, now in its second week, could weaken an already frail sector and “break the camel’s back”.

“The strike comes on top of negative sector profit margins over the last three years, with low capacity utilisation, as well as an increased influx of imported goods replacing South African products.

“South Africa cannot afford the current vicious declining spiral impacting the automotive, mining and construction sectors and the overall economy, and the worst is yet to come,” he said in a statement.

Engineering News Online on Thursday cited a report by Statistics South Africa, which showed that, on a year-on-year basis, the largest contributors to the 3.7% decline were motor vehicles, parts and accessories, which fell by 15.9% and subtracted 1.6 percentage points, and basic iron and steel and nonferrous metal products, which showed a 6.8% decline.

Food and beverages production also slipped 4.3% in May and subtracted a full percentage point from total manufacturing production levels in May.

The basic iron and steel, other fabricated metal products and household appliances subsector was the only industry to show growth between January and May, with all other sub-industries contracting when compared with the same period last year.

Langenhoven added that this data came on the heels of the June Kagiso Puchasing Managers’ Index business activity index, which indicated a further deterioration in business confidence since the beginning of this year.

This, he asserted, was a trend that started in the third quarter of 2013.

“While production levels held up until April, mainly owing to pre-emptive stock-building in anticipation of the current metals and engineering strike and a possible earlier resolution of the platinum mining strike, these drivers had since waned.

“As the sector strike has materialised, the mining recovery will be slow as a result of the strike’s duration and construction shows no signs of revival,” he averred.

The standoff between trade union, the National Union of Metalworkers of South Africa (Numsa), and majority employer body Seifsa continued as the union reiterated its demands of a one-year bargaining agreement comprising a 15% across-the-board wage hike and doing away with labour brokers, in addition to a R1 000 housing allowance.

But Seifsa remained steadfast in its offer of an up to 10% wage increase, which had seen Numsa’s 220 000-strong sector membership embarking on a violent industry-wide strike, now in its eleventh day.