The Steel and Engineering Industries Federation of Southern Africa (Seifsa) on Thursday warned South Africa’s metals and engineering sector to brace for tough times after several forecasts, manufacturing production statistics and purchasing manager’s index (PMI) data showed deteriorating trends.
Seifsa chief economist Henk Langenhoven said the metals and engineering sector would continue to struggle throughout 2016 owing to weak demand both locally and internationally, high production costs and an influx of cheap exports from Asian countries.
Indications of continuing contractions emerged as the latest Barclays PMI for December revealed a business activity subindex of nearly 11% below December 2014, when the sector had still been reeling from mass labour strikes and continued electricity disruptions.
Statistics South Africa’s November manufacturing production data showed a 3% contraction over the last 12 months and, with adjustments for the effect on production of the labour strike in July 2014, the contraction over 12 months was 4.5%.
There was evidence of similar weak prospects in most other confidence indices for the economy. These were new vehicle sales, retail trade, building construction, manufacturing and overall business confidence, he explained.
“Although production in the mining sector has recovered slightly during 2015, virtually all investment has stopped and many mines closed or are in the process of closing. This is a very worrying situation indeed,” Langenhoven stated.