Despite slower global
growth and power outages,
economists are predicting
moderate growth in
manufacturing output in
2015, albeit off the low
2014 base.
This follows the recent
release of manufacturing
output statistics for
November 2014 and
December 2014. The
Kagiso Purchasing
Manager’s Index (PMI)
declined by 3.3 index
points in December and
Statistics South Africa
figures showed a 1.3%
year-on-year decline in
November 2014.
Executive director of
The Manufacturing Circle,
Coenraad Bezuidenhout,
believes manufacturing
output growth for 2015
will depend on South
Africa’s traditional export
markets such as Europe
and the United States.
Nedbank economist, Nicola
Weimar, added that an
economic slowdown in
emerging markets such as
China would further affect
export demand and impact
manufacturing output.
Energy prices and labour
instability could also
impact manufacturing
output growth, according
to Bezuidenhout. “South
Africa is at a distinct
disadvantage as energy
prices are increasing
and energy supply is
decreasing,” he said,
adding that there were
again threats of strikes in
key industry sectors this
year which not only disrupt
production but undermine
business confidence.
Chief economist at the
Steel and Engineering
Industries Federation
of South Africa (Seifsa),
Henk Langenhoven, told
FTW that the impact
of electricity supply
disruptions on the metals
and engineering sector
was clearly visible in the
manufacturing output
statistics. “The cumulative
effect of the production
disruptions during 2014
now amounts to a 2.5%
overall contraction of
production in the sector,”
he pointed out.
Eskom’s announcement
last Thursday that loadshedding
was inevitable
for the first quarter of
2015 could mean a drop
of 23% per month in
production, said
Langenhoven.
The good
news is South
Africa’s close
proximity to
a growing
continent
where 800
million people
are expected
to make the move to
urbanisation over the
next 10 years, said
Bezuidenhout. “They will
need pots, pans, security
systems, security gates etc
which we can manufacture
very competitively in South
Africa,” he said.
Bezuidenhout said it
would be crucial for South
Africa to address market
access to Africa and reduce
obstacles to entry such as
tariff barriers
and red tape
which cause
major delays.
“South
Africa is also
facing renewed
competition
from its
neighbours who
are not only driving strong
industrialisation policies
but in many cases have
cheaper labour and more
affordable energy pricing,”
said Bezuidenhout.
INSERT & CAPTION
South Africa is at a
distinct disadvantage
as energy prices are
increasing and energy
supply is decreasing.
– Coenraad Bezuidenhout
INSERT
23% The estimated monthly
drop in production due to load-shedding.
CAPTION
Motor vehicle production decreased by over 33% late last year.
