Photo by: Duane Daws
The Statistics South Africa (Stats SA) manufacturing data released on Thursday revealed the fragility of the industry, said Manufacturing Circle executive director Coenraad Bezuidenhout.
Manufacturing production growth slowed to 2.2% during May, from 7.1% growth in April, and a 2.2% contraction in March.
Basic iron and steel, nonferrous metal products, metal products and machinery contributed 2.2 percentage points, while motor vehicles, parts and accessories, metal products and machinery contributed 0.6 percentage points.
Glass and nonmetallic mineral products and food and beverages contributed 0.2 percentage points each.
While contractions in meat, fish and fruit and beverages at -1.4% and -3.1% respectively could indicate pressure on consumers, many subcategories were “plagued by stiff competition” by unfairly incentivised imports. These included textiles, which contracted -10.6%, and structural steel, which declined -11%.
Bezuidenhout commented that the sectors that had recorded growth had benefited from well-structured incentives, interventions to curb unfairly incentivised imports and private sector investments to improve efficiency and productivity.
The manufacturing sector was expected to continue facing subdued demand conditions, while output growth within the large export-orientated industries would be contained by recession in the eurozone, a more measured Chinese economy and weaker international commodity prices, banking group Nedbank commented.
“At the same time, cost pressures will remain elevated, with high electricity costs, rising unit labour costs and expensive transport and logistics. In the inwardly-focused industries, demand conditions will also be broadly softer,” the bank said.
Bezuidenhout noted that a weaker rand, which also assisted in improving “destructive margin squeeze” in low-demand, high-cost conditions, had enabled an 8.5% increase in sales, in rand terms.
However, with high domestic costs and "relative affordability" of capital, protracted labour unrest in upstream sectors, such as mining and agriculture, would have knock-on effects for industrial peace in manufacturing and mechanisation and imports would become an immediate threat to retaining jobs in the sector.
It may also result in reversals in the currently fragile growth.