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Feb 29, 2012

Despite good indicators, Manufacturing Circle still concerned about 2012 prospects

Manufacturing Circle chairperson Stewart Jennings outlines his concerns for the outlook for manufacturing in 2012. Camera Work: Nicholas Boyd. Editing: Shane Williams.
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Notwithstanding a solid rise in manufacturing output and sales in the last quarter of 2011, as well as an improvement in business conditions and confidence levels, the Manufacturing Circle remained concerned about prospects for the sector for the balance of 2012.

Chairperson Stewart Jennings said the prospect for disruptive industrial action was lower than it was in 2011, owing to multiyear wage settlements. But export demand had come under pressure as a result of the recessionary conditions in key European markets, while the resurgent rand would increase the threat of import competition. The South African unit has recovered strongly and was trading at better than R7.50 to the US dollar on Wednesday.

Domestic manufacturers had, thus, become heavily reliant on a continued recovery in domestic demand, which improved markedly in the last quarter of 2011 when compared with the prior quarter of the same year.

The recovery was reflected in the Manufacturing Circle’s latest bulletin, which was compiled by Pan-African Research and Investment Services, based on survey responses from 48 CEOs heading enterprises covering a range of industrial sectors from steel and glass to pharmaceuticals and with revenues of between R300-million and R10-billion.

The proportion of respondents reporting growth in the value of domestic sales increased from about 75% in the third quarter to nearly 92% in the final quarter of 2011. Similarly, about 87% of the respondents realised positive growth in the volume of domestic manufacturing sales in the final quarter of the year.

Most CEOs were also more bullish about the outlook, with the proportion of respondents who felt that business confidence was ‘modest to good’ more than doubling, from 14.6% to 31.3%, in the fourth quarter of 2011.

But Jennings pointed out the sector had slumped materially from a buoyant first quarter and he was worried that a similar pattern could be repeated in 2012, unless action was taken to buoy domestic demand.

The Manufacturing Circle had appointed Stavros Nicolaou, a senior executive at Aspen Pharmacare, to work with government to help ensure that the localisation benefits promised in the revised regulations associated with the Preferential Procurement Policy Framework Act were actually delivered.

“We had a meeting with Trade and Industry [on Tuesday] where we made an appeal for South African and the retail sector to buy South Africans goods,” Jennings said, indicating that the organisation would also be seeking to liaise with the retail sector in a bid to gain its support for South African-made products.

“I’m concerned about this year . . . I don’t think we are out of the woods at all in terms of manufacturing. I think it’s going to be a tough, tough 12 months ahead.”

Edited by: Creamer Media Reporter
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