May 25, 2012
Africa|Industrial|Resources|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
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
The broad-based black economic-empowerment (BBBEE) alignment process in the con-struction sector has begun, dur-ing which the sector codes of the Construction Sector Charter Council (CSCC) will be aligned with the revised Codes of Good Practice (CoGP), which come...
It is second time lucky for Toby Venter. Ten years ago he negotiated to buy the Kyalami racetrack, but “the deal did not materialise”.
Environmental solutions company I-Cat started construction work on its R22-million, 1 949 m2 environmentally sustainable office and warehouse facility, commissioned by I-CAT Environmental Solutions, at a launch event in October. The new sustainable I-CAT campus,...
Effective file synchronisation and sharing across an organisation’s structures can provide the basis for robust mobile-device and document management while maintaining proper backup, version control and content distribution. These are the lessons learned by complex...
Hotel group Carlson Rezidor currently holds the largest hotel pipeline in Africa with 30 hotels and 6 300 rooms under development. The hotel group develops and operates Radisson Blu in the upper upscale segment and Park Inn by Radisson in the mid-market segment. With...