The short-term outlook for manufacturing conditions in South Africa is “downbeat”, the latest Manufacturing Circle survey shows, with 71% of respondents expecting either “poor” or “fragile to weak” conditions for the coming two quarters.

In addition, the second-quarter survey, which covers 53 manufacturing enterprises of varying sizes across a range of sectors, indicates that most respondents have no plans for new employment, with 43% expecting to cut jobs in the current quarter.

Surveyed manufacturers also expect muted conditions over the year ahead, but the majority expected conditions to stabilise over the medium term.

The survey, which is compiled for the lobby group by Pan-African Investment and Research, highlights uncertainty in the labour market as a key reason for the bleak assessment, with respondents concerned that the Labour Relations Act does not have a clause for a forced resolution in case of a deadlock in negotiations.

The five-month strike in the platinum sector had a negative influence on the survey results and it was followed by a shorter, yet still protracted, strike in the metals and engineering sector.

Besides the labour climate, respondents were worried about elevated wage and input costs, competition from imported goods, low labour productivity, a lack of adequate skills, and faltering consumer spending.

For the first time since the fourth quarter of 2012, the quarterly average of the Kagiso Purchasing Managers’ Index (PMI) descended into contraction territory in the quarter, while key subindices of the PMI, such as new sales orders and employment, fell below the critical mark of 50.

Manufacturing Circle found that demand conditions were “soft over the quarter”, with 35% of survey participants recording an increase in the volume of domestic sales in the period, compared with 42% of the respondents who reported a similar increase in the corresponding period in 2013.

However, close to 50% of the respondents exported between 1% and 20% of their output, supported by the weaker rand, and solid demand from Africa, as well as Europe and the US.

The rest of Africa remained the most significant destination for South African manufactured goods, with close to 40% of respondents selling more than 80% of their exports in Africa during the period, up from 33% in the same period last year.