The decrease in manufacturing production, as shown by the data released by Statistics South Africa (StatsSA) today, is concerning, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
SEIFSA Economist Marique Kruger said the data, which reflects a decrease in output for April 2020, does not augur well for companies in both the Metals and Engineering (M&E) cluster of industries and the broader manufacturing sector, especially given the need for companies to remain resilient against the backdrop of a weak economy that is also under pressure due to the coronavirus pandemic.
The latest preliminary seasonally adjusted production data captures a year-on-year decrease in production in the broader manufacturing sector in April 2020 when compared to March 2020, with manufacturing output decelerating to -49.4% in April 2020 from -5.5% in March 2020. On a month-on-month basis, output in the broader manufacturing sector was -44.3% in April 2020 from March 2020, highlighting continuing volatility.
“The declining output trend is worrisome and the poor performance compounds the various challenges faced by local businesses in the diverse M&E sub-sectors, including a disruption of supply-chain activity since the advent of the COVID-19 pandemic,” Ms Kruger said.
“Businesses are facing tough times, given the current economic environment underpinned by prevailing constraints and a volatile exchange rate, while also trying to deal with the contagion effects of the pandemic, which has also restrained brick-and-mortar meetings and business activity,” she said.
Ms Kruger said that, to assist the industry, it would be important for policy makers to concentrate on demand-side measures aimed at boosting demand and, by extension, production for local businesses.
“It is important to sort out demand; increased demand for intermediate and final manufactured products will invariably compel companies to increase capacity utilisation and manufacturing processes. Moreover, increased sales will have a direct positive effect on struggling companies’ profits and margins,” Kruger said.