The latest manufacturing production data released by Statistics South Africa this afternoon is consistent with the economy’s poor performance since the beginning of the year and does not bode well for the future, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Economist Marique Kruger said today.

After adjusting for the sectoral weights, the preliminary seasonally-adjusted production data for the M&E cluster of industries indicated that output decreased to -7.2 percent on a year-on-year basis in March 2020, from -4.1 percent in February 2020. The M&E sector’s annual performance was generally in line with that of the broader manufacturing production, which decreased on an annual basis from -2.3 percent in February 2020 to -5.4 percent in March 2020

Ms Kruger said the data released by Statistics South Africa made for depressing reading.
Key M&E sub-industries were the largest negative contributors to the poor performance of overall manufacturing production data.

Specifically, the basic iron and steel products sub-component, the basic non-ferrous metal products sub-component and the motor vehicle parts and accessories sub-component registered 8.7 percent, 11.4 percent and 12.9 percent year-on-year decreases in production volumes, contributing -1.8, -1.8 and -1.0 respectively.

“The data does not augur well for businesses, especially considering the tough economic environment and covid-19 economic crisis, a generally weaker exchange rate and volatile input costs which generally reduce business margins,” Ms Kruger said.

She said it was imperative that policy makers gave serious consideration to providing incentives which will boost demand for locally manufactured goods in order to improve production levels.

Ms Kruger said it may also be important for the Government to reconsider administered prices which have a bearing on logistics costs, such as some of the fuel levies, for struggling businesses. She said such an intervention was likely to boost consumer demand and have positive spill-over implications for both capacity utilisation and local businesses’ production potential.