Forty per cent of the 72 respondents to the Manufacturing Circle’s latest survey indicate that they could cut jobs in the coming year, despite the recent fall in the value of rand, which could raise export competitiveness and bolster import substitution.
Nascence Advisory and Research economist Xhanti Payi, who compiled the fourth quarter survey for the lobby group, said the employment outlook came amid “relatively negative” sentiment, but stressed that only 20% warned that they could cut employment in the coming three months.
More than 50% of respondents, which collectively employed over 100 000 people, reported a deterioration in operating conditions during the final quarter of the year.
The firms surveyed – which traversed the full manufacturing milieu, from metals fabricators and packaging companies to food and pharmaceutical producers – also expected a deterioration over the coming 12 months, with more than 60% expecting conditions to worsen during 2016.
This sentiment was in line with weak manufacturing production and capacity utilisation in 2015, as well as the Barclays Purchasing Managers Index for South Africa, which came in at 43.5 in January, reflecting continued contraction.
But the Manufacturing Circle’s Mike Arnold, who is also CEO of Consol, stressed that there was “anecdotal evidence” that the export performance of the sector could improve, owing largely to the recent weakening in the South African currency.
“There is no doubt that we are seeing increased enquiries and actual exports taking place,” Arnold said, arguing, however, that there could be a two-quarter lag before these exports began showing through in the survey results.
However, a number of manufacturing input costs were also rising as a result of the weaker rand.