https://www.engineeringnews.co.za
Africa|Business|Components|Construction|Efficiency|Engineering|Environment|Financial|Industrial|Manufacturing|Mining|Seifsa|Steel|Manufacturing
Africa|Business|Components|Construction|Efficiency|Engineering|Environment|Financial|Industrial|Manufacturing|Mining|Seifsa|Steel|Manufacturing
africa|business|components|construction|efficiency|engineering|environment|financial|industrial|manufacturing|mining|seifsa|steel|manufacturing-industry-term

Sector still affected by economic downturn

DR MICHAEL ADE
The M&E sector has been very resilient, registering a slight quarterly annual increase in its share of the country’s gross domestic product

DR MICHAEL ADE The M&E sector has been very resilient, registering a slight quarterly annual increase in its share of the country’s gross domestic product

19th July 2019

By: Mamaili Mamaila

Journalist

     

Font size: - +

Owing to the global economic crisis which started in late 2008, a structural break occurred in the metals and engineering (M&E) sector, which had hitherto recorded the highest production figure of almost 120 index points, says the Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist Dr Michael Ade.

“To date, the sector is still struggling to attain its 2007/8 growth levels, largely owing to low domestic demand and poor investment levels, as well as poor productive efficiency and business confidence.”

Ade states that two key periods were instrumental in disrupting the production pattern of the M&E sector – the global financial crisis that peaked in 2009 and the production disruption in 2014, which also impacted negatively on the long-term production function of the M&E sector.

“When the production levels during these crucial periods are compared, the analysis reveals that production dropped on average by 12% in July 2014, compared with June 2009. Although it is encouraging that the latest preliminary monthly production index for December 2018 was above its 19-year average of 100.5 index points, the current production at the end of March 2019 has dipped to 98.0 index points.”

Ade mentions that, despite the challenges of the weak rand, pricey imported components and increasing intermediate input costs, the M&E sector has been resilient, registering a slight quarterly annual increase in its share of the country’s gross domestic product (GDP).

The sector’s GDP contribution increased slightly, from 3.44% in the first quarter of 2018 to 3.46% in the first quarter of 2019.

“Comparatively speaking, the M&E sector’s contribution in the first quarter of 2019 was better than that of construction – 3.44% – and agriculture – 2.08%. It was, however, lower than that of the mining sector, which was 6.87%.”

There is still room for the M&E sector to further improve its contribution to more than 6%, as it comprises about 45% of the broader manufacturing sector, he enthuses.

Further, to achieve that, key challenges, such as a weak local and global environment – heightened by increasing domestic intermediate input costs, volatile prices of imported components, load-shedding and the US-China trade war, need to be addressed, Ade highlights.

Other challenges include the poor performance of the construction sector and industrial production; stagnant domestic demand and low real GDP growth, which impacts negatively on demand; and the dearth in greenfield or new investments.

“Unfortunately, all these factors weighed heavily on global demand, with extended ramifications for South Africa’s M&E sector.”

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features

Comments

Showroom

Rentech
Rentech

Rentech provides renewable energy products and services to the local and selected African markets. Supplying inverters, lithium and lead-acid...

VISIT SHOWROOM 
VEGA Controls SA (Pty) Ltd
VEGA Controls SA (Pty) Ltd

For over 60 years, VEGA has provided industry-leading products for the measurement of level, density, weight and pressure. As the inventor of the...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.244 0.306s - 163pq - 2rq
Subscribe Now