May 25, 2012
Africa|Export|Industrial|Resources|Sustainable|Africa|Europe|Malaysia|South Africa|South Korea|Thailand|Gross Domestic Product|Manufacturing|Manufacturing Businesses|Manufacturing Output|Manufacturing Sector|Infrastructure|Rob Davies
© Reuse this
Despite warnings that the output improvements of January and February might not be sustainable, it nevertheless came as something of a shock to learn that manufacturing output fell by 4.3% month-on-month in March, and by 2.7% year-on-year.
The performance represented a sharp deterioration from the 4% year-on-year growth reported in February and was also well below market expectations of 3.3% growth.
Moreover, the output decline was broad based and also came against the backdrop of forward-looking indicators suggesting that the feeble March performance was likely to continue into April and possibly for much of the rest of the year.
Weak demand from Europe and slower growth in some emerging markets are likely to undermine export sales, while domestic demand is unlikely to shoot out the lights, particularly in the current gap period between government’s infrastructure promises and actual delivery.
In many ways, South Africa’s manufacturing sector is not a million miles away from where it was prior to the 2009 recession, which saw manufacturing businesses shed about 200 000 jobs.
Sadly, the current weakness is also part of a chronic problem, as Trade and Industry Minister Dr Rob Davies pointed out again last week, when unveiling a much-needed new nonsector-specific incentive for manufacturers.
The contribution of manufacturing to the total output of the South African economy has been falling since the mid-1970s. In 2011, the sector contributed 14.6% of gross domestic product (GDP), well down from its 21% GDP contribution in 1977.
In an effort to reinforce the importance of manufacturing to South Africa’s future employment and growth prospect, Davies also offered a sobering comparison between the performances of South African manufacturers and those in fast-growing Asian economies.
“In 1977, manufacturing made up 23.65 % of output in South Korea and, by 2010, this figure had grown to 30.6%,” he noted. In Malaysia manufacturing output made up 19% of output in 1977 but had risen to 26.1% by 2010. Similarly, in Thailand, the figure was 20% in 1977 but, in 2010, it stood at 35.6%.
Davies argued further that “no developing country has prospered in the last three decades with an industrial sector that has shrunk as much as ours”.
Few would disagree. However, despite the much-needed attention now being given to reviving the sector, along with some resources, the jury remains out on whether enough is truly being done to reverse the fortunes of manufacturing. Unless this deindustrialisation trend is reversed, South Africa’s growth and employment prospects will be under pressure.
Edited by: Terence Creamer© Reuse this Comment Guidelines (150 word limit)
Other Editorial Insight News
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
Forest products group Sappi has confirmed the selection of its 25 MW biomass-to-power project, to be erected at its Ngodwana mill, in Mpumalanga, as a preferred bidder under the South African government’s Renewable Energy Independent Power Producer Procurement...
Information and communications technology (ICT) distributor DCC is making Windows- and Android-operating systems tablets available through retailers and education equipment suppliers to provide school children with affordable, high-performance education tools. The...
Another cement manufacturer is set to enter the Ugandan market, raising hopes that prices will come down and spur growth in the construction industry. National Cement, a Kenyan manufacturer, has unveiled plans to invest $195-million in a new manufacturing plant in...
With growth rates exceeding that in the developed world – at an average of between 4% and 5% between 2002 and 2014 – African countries provide investors with ample reason to tap into booming consumer demand says Manufacturing Circle executive director Coenraad...
The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) decreased by 3.7 index points month-on-month to 89.1 in March.