Statistics South Africa (Stats SA) reports that, in June, overall South African manufacturing production increased by 12.5% year-on-year primarily as a result of positive contributions from the sectors of motor vehicles, metal products, wood products, food and beverage, as well as furniture and other manufacturing.
The contributions made by the automotive sector, comprising the manufacturing of motor vehicles, parts and accessories and other transport equipment, increased by 84.1%, contributing 4.9 percentage points.
As for the metals sector, Stats SA finds that manufacturers of basic iron and steel, non-ferrous metal products, and metal products and machinery increased their output by 19.2%, contributing 3.5 percentage points.
In a statement, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) says the improvement in metals and engineering (M&E) production and sales is encouraging as it indicates the economy is slowly gaining momentum despite the Covid-19 pandemic.
The federation says that, within 13 of the M&E subsectors, which account for a 29% share of manufacturing production, total production increased by an average of 27.6% year-on-year in June.
Also, total M&E sales increased by 38.6% year-on-year to R81-billion in June, with the largest sales value being in the non-ferrous metal products category, at R19.1-billion.
Meanwhile, the wood and wood products, paper, publishing and printing sectors increased their output by 22.8%, contributing 2.3 percentage points.
The food and beverages sector increased its output by 5.9% during the period under review, contributing 1.9 percentage points; while the furniture and “other” manufacturing sector increased production by 73.5%, contributing 1.4 percentage points.
However, Stats SA notes that, in comparison with May, seasonally-adjusted manufacturing production contracted by 0.7% year-on-year in June. This followed month-on-month changes of -2% in May and -1.4% in April.
As for the manufacturing sector’s performance in the second quarter of the year, Stats SA reports that seasonally-adjusted manufacturing production decreased by 1% when compared with the first quarter. Six of the ten manufacturing divisions reported negative growth rates over this period.
During the second quarter, Stats SA says the largest negative contribution was made by the petroleum, chemical products, rubber and plastic products division, decreasing by 7.3% and contributing -1.4 percentage points.
Conversely, the largest positive contribution was made by the basic iron and steel, non-ferrous metal products, metal products and machinery division, which increased 3% in the second quarter, contributing 0.6 of a percentage point.
In terms of sales, Stats SA reports that, in comparison to May, seasonally adjusted manufacturing sales decreased by 0.3% in June, following month-on-month changes of -0.2% in May and -2.6% in April.
METALS & ENGINEERING
Seifsa states that, as one of the backbone sectors of the South African economy, the M&E sector remains a “crucial” supplier of inputs into major sectors such as construction, automotive, mining and other manufacturing sub-industries.
Therefore, the federation says the M&E sector is an integral part of economic and industrial development in South Africa.
Seifsa chief economist Chifipa Mhango states that it is, therefore, crucial that the government support a turnaround in the M&E sector by prioritising the implementation of policy interventions identified in the Steel and Metals Fabrication Masterplan.
He adds that the current capacity use level of below 80% within the M&E sector remains a concern. “With the government easing lockdown restrictions and accelerating the Covid-19 vaccination drive, the M&E industry needs to focus on ramping up production to meet increased demand as the economy normalises.”
However, Mhango says the civil unrest of mid-July, which impacted KwaZulu-Natal and Gauteng, will negatively impact production patterns. “While the current production data is positive, we expect growth patterns in July to be slightly lower due to the disruptions caused by the unrest and looting, as depicted in the lower Purchasing Managers Index data of 43.5.”
Nonetheless, he says the current scenario in manufacturing production in South Africa is in line with the positive trend globally. Manufacturing production in major economies such as China, the US and Europe is growing at rates of 8.8%, 16.1% and 39.4%, respectively.