A STITCH IN TIME: Workers at a clothing factory in Maitland, Cape Town.
A STITCH IN TIME: Workers at a clothing factory in Maitland, Cape Town.

Easing of lockdown restrictions shows improved results for manufacturing industry

By Siphelele Dludla Time of article published Sep 16, 2020

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JOHANNESBURG - Sentiment in the manufacturing industry improved in the third quarter of this year following an unprecedented period during which many manufacturers suffered significant production declines and confidence fell to record low levels.

The Absa Manufacturing Survey results today showed an improvement in business conditions and confidence with the easing of Covid-19 lockdown restrictions.

Manufacturing business confidence rose from a record-low of 6 index points in the second quarter to 22 index points in the third quarter, the highest confidence level recorded for the year to date.

The quarterly survey, which covered approximately 700 business people in the manufacturing sector, ranges between zero and 100, with zero reflecting an extreme lack of confidence and 100 extreme confidence.

Absa said the increase in confidence was in line with other recent data releases which have also been trending upwards from the low base in the second quarter.

The bank said fewer manufacturers have reported a decline in output during the third quarter as manufacturers have been allowed to restart production.

Head of manufacturing sector at Absa Retail and Business Bank, Justin Schmidt, said the majority of South African manufacturers were still experiencing production levels lower than last year.

“However, there is a significant improvement quarter-on-quarter, meaning that fewer respondents experienced lower production, so the worst may be behind us,” Schmidt said.

“There are still a lot of constraints, but domestic and export sales have started to improve which have supported South African manufacturers.”

The survey was conducted by the Bureau for Economic Research (BER) at Stellenbosch University between 12 and 31 August.

Survey respondents still noted significant supply chain disruptions, including longer delivery periods and a lack of payment impacting cash flow despite more of the local and global economy opening.

Schmidt said the survey shows that the South African manufacturing sector was moving in the right direction.

However, Schmidt said the risk remained that this rebound may be too slow and many manufacturers may have to restructure or permanently shut down.

“Although there is some positive momentum in the sector, much of this stems from base effects,” Schmidt said.

“There is still a lot of work ahead to ensure the sector doesn’t take years to recover its lost volumes and revenue, including fast tracking new energy supply and delivering on regulatory reform across multiple sectors – thereby creating an environment that is more likely to drive demand for manufactured goods.”

BUSINESS REPORT

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