The Manufacturing Circle on Friday called on Finance Minister Pravin Gordhan to urgently consider the institution of a fiscal review to ensure that processes related to the financing of infrastructure maintenance and expansion were in line with the best practices of South Africa’s trading partners to ensure the country remained competitive.
“This will be essential to ensure that the playing field for our domestic manufacturers is as level as possible,” the organisation stated.
Its appeal followed the release of the Kagiso Purchasing Managers Index (PMI) on Friday, which indicated a 1.7 point increase to 49.1 in January, which remained below the critical 50-point mark for the fifth month in a row.
The marginal rise in the headline PMI masked sharp movements in the key PMI subcomponents, which included the employment indicator losing a further 2.4 points in January to reach 42.3 – its worst reading since mid-2011.
“At the start of the year, this does not bode well for actual job creation in the manufacturing sector,” noted Bureau for Economic Research senior economist Hugo Pienaar.
The Manufacturing Circle stated that a fiscal review should also urgently consider the financial position of South Africa’s key municipalities, some of which were using high mark-ups on electricity and rapid escalations of utility service deposits of long-standing industrial customers as arbitrary and unsustainable methods to ensure they remained cash positive.
It added that, although there were slight upticks in sales and business activity, the global economic recovery remained fragile and the domestic market remained under pressure from unfairly incentivised and illegal imports.
“This means that nurturing the domestic manufacturing sector will be important if [the PMI] is to be lifted out of the contraction zone, where it has hovered for five months,” said the organisation.
It added that the PMI indicated that the impact of the mining strikes still reverberated through the manufacturing sector and that stealth taxes, administered price increases and the proposed Eskom electricity price hikes continued to weigh heavily on the outlook of manufacturers.
“We have engaged with the National Treasury and the Department of Trade and Industry around the need for urgent industrial policy intervention to provide some relief to industrial customers from the rapid electricity price increases, which pose a severe threat to cost-competitiveness and, ultimately, employment in the sector,” the organisation said in a statement.
It noted that it was critical for both labour and business to not adopt a myopic approach to solving sectoral labour disagreements that could have significant economy-wide impacts.
“Manufacturing has already shed 300 000 jobs since 2008 – far more than the 14 000 mining jobs recently called into jeopardy because of last year’s violent mining strikes – and further job losses are likely if manufacturing is to be rendered vulnerable by violent and protracted strikes in other key sectors,” the organisation warned.