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Economic reform critical for sustainable growth path – Seifsa

9th March 2022

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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South Africa's lacklustre approach to implementing the economic reform programmes necessary to turn the economy around is one of the reasons the economy has not clawed back the ground lost as a result of the Covid-19 pandemic, says metals and engineering industry body Steel and Engineering Industries Federation of Southern Africa (Seifsa) COO Tafadzwa Chibanguza.

“Gross fixed capital formation for 2021 increased by a disappointing 2.03%. The metals and engineering sector's fortunes are linked to higher levels of economic activity, which is driven by greater investment into the economy, particularly fixed investment.

"The gross domestic product (GDP) outcomes for two key markets of the metals and engineering sector output, namely the mining and construction sectors, experienced varied outcomes of an 11.8% increase for mining and a 1.9% decrease for the construction sector.”

The economy is projected to grow by 2.1% this year and then to average 1.8% over the next three years, says Seifsa, adding that it has previously highlighted that this economic performance is too weak to provide a platform for higher demand for metals and engineering sector products such as steel.

“An aggressive reform agenda, focused on implementation, in the energy, transport, water, security and greater fixed investment into the economy, is therefore urgently required if the South African economy and the metals and engineering sector are to grow,” he says.

GDP figures released by Statistics South Africa show that the South African economy grew by 1.2% in the fourth quarter of 2021 and 4.9% for the full year. In 2020, the economy contracted by 6.4% as a result of the economic disruption associated with the Covid-19 pandemic.

The manufacturing sector grew by 6.62% on the back of a 12.3% contraction in 2020. The metals and engineering sector constitutes 30.9% of the manufacturing sector.

However, on the metrics of measuring the economy’s performance over the past two years, the economy has not clawed back the ground lost owing to the Covid-19 pandemic.

“This is a worrying outcome. Firstly, although supply chain disruption did impact global trade since the onslaught of the pandemic, generally, the global economic environment was supportive toward recovery. However, the economy experienced a substantial contraction of 1.7% in quarter three of the year due to the civil unrest in July 2021, which naturally eroded from the gains.

"The unrests were akin to an economic own goal, highlighting the urgent need to address the security situation in the country,” says Chibanguza.

“The outcome of the economy’s performance in 2021 should be read in the context of the base effect that will influence the readings. That is, the Covid-19-induced lower readings of 2020 will naturally exaggerate the 2021 outcomes, when the two years are compared on a year-on-year basis.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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