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Tough leadership needed to improve SA economy

5th July 2019

     

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The 3.2% drop in South Africa’s gross domestic product (GDP) in the first quarter of 2019 demonstrates that the country needs more than the now-routine lip service paid by its political leadership to economic growth amid the euphoria which greeted Cyril Ramaphosa’s ascendancy to the Presidency last year, says Steel and Engineering Industries Federation of Southern Africa (Seifsa) CEO Kaizer Nyatsumba.

He mentions that this major drop, which was the largest in a decade, is evidence that merely talking about a new dawn without having the courage to tackle the country’s myriad challenges would not suffice.

Nyatsumba adds that regrettably, it has been during Ramaphosa’s time in office that South Africa experienced a recession last year, and now comes the depressing news that the economy has shrunk by its biggest margin since 2009. “We have previously been told about an economic stimulus to reinvigorate the economy, but no evidence of that has been seen so far.”

He mentions that Seifsa will seek an urgent meeting with Trade and Industry Minister Ebrahim Patel and his colleagues within the economic cluster of Ministers to discuss the concerns of the metals and engineering sector, which is a vital part of manufacturing.

He says the situation calls for bold leadership from Ramaphosa and his government, not merely soothing words, and requires that tough decisions be taken speedily to reverse the malaise confronting the country.

“Ramaphosa has now obtained a mandate from the electorate; he and his team can no longer continue to fiddle while the country burns. “We are currently confronting a growing economic crisis, which has the potential to get completely out of control. “Tough leadership, as opposed to tepid leadership and mere rhetoric, is called for,” he comments.

Meanwhile, Seifsa economist Marique Kruger says the decline in the GDP is disconcerting to businesses that continue to face headwinds amid spiralling operational expenses and rising intermediate input costs underpinned by high petrol prices and electricity costs.

However, following manufacturing production figures released by Statistics South Africa (Stats SA) last month, Seifsa is encouraged by the continuous positive growth in the broader manufacturing sector production.

Speaking after the release of the data, Kruger said, despite the struggling economy and continuous headwinds faced by companies in the broader manufacturing sector, which included the metals and engineering cluster of industries, businesses were able to stay resilient.

The latest preliminary seasonally-adjusted production data for the broader manufacturing sector released by Stats SA indicates that output improved to 4.6% year-on-year in April 2019, compared with April 2018.

On a continuous three-monthly basis, output in the broader manufacturing sector consecutively trended positively from 0.7% in February 2019, to 1.3% in March 2019 and to 4.6% in April 2019. On a month-on-month basis, the manufacturing sector’s performance was also inspiring – registering 2.8% in April 2019 compared with 0.9% March 2019.

Kruger notes that, despite the encouraging production data, there are still concerns regarding various constraints including exchange rate volatility, increasing intermediate input and operational costs, and high fuel and energy costs.

“These variables, no doubt, dropped the value add by manufacturing to the GDP in quarter one of 2019, and have the ability to further hinder manufacturing’s contribution in the second quarter of 2019.”

However, Kruger concludes that the expectation is for the generally weak exchange rate to boost manufacturing export competitiveness in the mid-term, to the benefit of businesses, bolstering resilience and building on the positive performance of the last three months, as collectively the country seeks ways of reigniting long-term growth and the sector’s value add.

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features

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