The fourth quarter of 2017 saw increased investment in manufacturing with the Manufacturing Circle (MC) expecting this upward trend to continue on the back of growing optimism about South Africa’s economy.
Releasing the Manufacturing Circle’s fourth quarter investment tracker last month, its chairman, Andre de Ruyter, said the three point increase (to 63) over the 2016 figures was driven by new investments in property and higher spend on salaries and wages.
He pointed out that this was largely to be expected as it was peak season for most producers and they often got temporary staff in, but there was a clear shift in sentiment amongst manufacturers.
“Management teams are more positive about the future,” said De Ruyter.
He pointed out that the survey results showed that investments in new plants and equipment were likely to continue in the first quarter of this year.
One of SA’s largest manufacturing sectors, the metals and engineering (M&A) sector, is also upbeat with Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist, Dr Michael Ade, welcoming the increased investment and higher output performance in the last quarter of 2017.
“The performance of the M&E cluster generally augurs well for the broader domestic economy and hopefully will significantly boost the gross domestic product (GDP) for quarter one of 2018.” However, challenges to the supply side of the economy – especially in industrial production – still prevailed, he added.
The benefits of a slight up-tick in production in the M&E cluster in 2017 were still not being felt by local companies due to prevailing economic challenges, with the production trend still remaining variable, he said.
“It is clear that while the recent political forces of change have the potential to improve on perception, credit worthiness and the output stance of the domestic economy, there is still more work to be done in all industrial sectors in general and in the manufacturing sector in particular. The contribution of the manufacturing sector to the broader economy has declined over the years, from roughly a 24% contribution to GDP in the 1990s to a low 12.29% in 2017, with dire consequences on jobs levels,” commented Ade.
He said there was a need to continue exploring ways of reviving the fortunes of the sector. “Clearly, there is still more work to be done and all stakeholders have to pool resources to ensure a return to the glorious growth levels last recorded in the early 1990s.
“This is possible, given the improvement in business confidence and sentiments since the beginning of this year, against the backdrop of a domestic political shift,” Ade said.
