Photo by: Duane Daws
The cumulative effect of several uncertainties in South Africa’s metals and engineering sector, amid a lack of demand – or prospects of an upswing – and idle production capacity, did not bode well for 2015, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) warned this week.
Chief economist Henk Langenhoven warned of profits not materialising and little investment activity taking place, with the unknown impact of the electricity constraints of “extreme concern” over the next year.
This followed Statistics South Africa’s release of the full-year manufacturing production data this week, confirming Seifsa’s prediction that the combined impacts of production disruptions and unfavourable economic conditions would lead to a contraction in 2014.
Output in the manufacturing sector had contracted by 2.8% in 2014, compared with output in 2013, he explained, adding that 2014 was a “disappointing year”.
“It was expected that growth would resume after the 2% contraction during 2013, but the hope of continued domestic and international economic recovery at the beginning of the year faded during the course of the year,” said Langenhoven.
Production levels were still 25% to 30% lower than they peaked in 2007.
“Employment declined, capacity use remained below optimum and profitability declined,” he said, noting that the “only highlight” of the reported December data was that, on a year-on-year basis, output in December 2014 was 2.4% higher than in December 2013.
Only two out of ten of the subindustries – namely other fabricated metals and household appliances – had recorded minor expansion over the 12-month period.
The rubber products, plastics and basic iron and steel subindustries recorded contractions in output of 7.2%, 3% and 0.4% respectively, while declines of 3.9%, 7.1%, 12.3% and 0.7% respectively were reported in the nonferrous, structural steel, general purpose machinery and electrical machinery and equipment subindustries during the past 12 months.
“It is clear from the subindustries performances that they found it particularly difficult to resume normal production in December after the November electricity disruptions,” Langenhoven said.