The coronavirus outbreak has had an immediate disruptive effect on the manufacturing sector and its supply chains, Professor Alwyn Hoffmann has told a webinar hosted by the Trans-Kalahari Corridor Secretariat on the devastating consequences on the national and regional economies of the Covid-19 pandemic.
According to the engineering lecturer from the North West University, this is because original equipment manufacturers (OEMs) rely heavily on just-in-time production.
He said the shutdown of the economy and its impact on manufacturing had led to a decline of at least 16% for the automotive industry – one of South Africa’s strongest export sectors – seriously affecting the country’s GDP.
From a liquidity perspective, Hoffman emphasised that Covid-19 had had a crippling effect on a lot of manufacturers.
“Some OEMs have low liquidity - and with minimal operating cash flows, the remaining cash reserves are on average depleted in less than two months.”
It means that without access to lifeline funding, some players risk going out of business.
It was estimated, Hoffman said, that in the automotive sector alone, global light vehicle sales in all major regions were forecast to decline by around 12% in 2020.