The Steel and Engineering Industries Federation of Southern Africa (Seifsa) has described the year-on-year improvement in manufacturing production in March as encouraging, despite coming off a low base, with March 2020's output having been negatively impacted on by lockdown restrictions.
According to manufacturing data released by Statistics South Africa on May 11, manufacturing production increased by 4.6% year-on-year and by 3.4% month-on-month, in March.
Manufacturing sales increased by 17.8% year-on-year and by 5.9% month-on-month.
For the year to date, production declined by 0.5% year-on-year, while sales increased by 7.4%.
Within the Metals and Engineering (M&E) subsector of the manufacturing sector, which accounts for 29% of total manufacturing production, the 13 subcategories saw a production increase of an average of 5.5% year-on-year in March.
Total sales increased by 18.8% to reach R87.8-billion in March, with the largest sales value being in nonferrous metal products at R23.7-billion.
Seifsa chief economist Chifipa Mhango says the figures bode well for the M&E industry as they signal a return, albeit slow, to normal economic activity.
“When you look at these figures in conjunction with recently released capacity utilisation data of 74% in the manufacturing sector for the first quarter of 2021, it can be surmised that there is more room for increased activity and, hence, production,” he explains.
Mhango adds that the federation is hopeful of a sustained improvement in manufacturing production, particularly given that Absa’s Purchasing Managers Index data also indicates an expansionary trajectory.
However, he points out that any sustained improvement in the manufacturing sector, and the M&E industry in particular, will depend on realised efforts on government’s part to revive the economy.
Mhango notes that the current state of the M&E sector is that of a declining level of employment as well as investment, with a weak trade position with the rest of the world.
With a national unemployment rate at 32.5%, South Africa’s industrial base needs to be supported through massive improvements in fixed investment.
“To support the growth momentum we are seeing in manufacturing production, the government will need to speed up the implementation of the Steel Master Plan to the benefit of the local M&E industry, both primary and downstream, and ensure that State entities adhere to localisation procurement rules in public infrastructure spending,” Mhango states.