Johannesburg - The ongoing metals and engineering strike is likely to worsen performance in the sector, Seifsa said on Thursday.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said production data released by Statistics SA on Thursday dashed hopes that growth in the sector would be higher this year than it was last year.
Seifsa chief economist Henk Langenhoven said the worst was yet to come.
Statistics SA reported a 3.7 percent year-on-year decrease in manufacturing production in May.
The decrease was attributed to lower production in the motor vehicles, parts and accessories and other transport equipment, which decreased by -15.9 percent, contributing -1.6 percentage points).
Basic iron and steel, non-ferrous metal products, metal products and machinery were down by -6.8 percent, contributing -1.5
percentage points) and food and beverages were down -4.3 percent, contributing -1.0 percentage point.
Langenhoven said the latest piece of bad news came on the heels of the June Kagiso Purchasing Managers Index business activity index released earlier, which indicated a further deterioration in business confidence since the beginning of the year.
That, he said, was a trend which started in the third quarter of 2013.
“While production levels had held up until April, mainly due to pre-emptive stock building in anticipation of the current metals and engineering strike and a possible earlier resolution of the platinum mining strike, these drivers have since waned,” he said.
The mining recovery would be slow due to the strike's duration and construction showed no signs of revival, he added.
Langenhoven said the collapse in production was severe, with May levels four percent lower than April, and May 2014 nearly seven percent lower than the same month last year.
Langenhoven said there was a real danger that the metals and engineering strike, now in its second week, could break the camel's back.
“The strike comes on top of negative sector profit margins over the last three years, with low capacity utilisation, as well as an increased influx of imported goods replacing South African products.
“South Africa cannot afford the current vicious declining spiral impacting the auto, mining and construction sectors and the overall economy,” Langenhoven said.
Members of the National Union of Metalworkers of SA have been on strike since July 1, with Numsa demanding a 15 percent wage increase and a R1000 housing allowance in a one-year bargaining agreement.
The union also demanded that the use of labour brokers should cease.