METAIR will invest more than R900 million in property, plant and equipment to support Ford Motor Company of Southern Africa’s investment and production expansion programme.     Supplied
METAIR will invest more than R900 million in property, plant and equipment to support Ford Motor Company of Southern Africa’s investment and production expansion programme. Supplied

Production figures mirror South Africa’s performace

By Siphelele Dludla Time of article published Jun 12, 2020

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JOHANNESBURG - South African manufacturing production mirrored the economy's poor performance this year and slowed for the tenth month in a row to 5.4 percent year-on-year in March.

Manufacturing production in February slid 2.3percent. “This is the biggest year-on-year drop in activity since December, when production fell by 6.3 percent,” said Nicolai Claassen, a director of industry statistics for Statistics South Africa (StatsSA).

“Nine of the 10 manufacturing divisions experienced a slow down in activity in March.”

StatsSA said the basic iron and steel, metal products, and machinery division recorded its biggest year-on-year fall in production since January 2016, declining by 8.5percent and contributing -1.3 percentage points to the print. The petroleum, chemical products, rubber and plastic products division was the second biggest burden on the total manufacturing production, falling 5.8percent.

The automotive division experienced a 13percent decline as a result of the slowdown in the production of vehicles, parts and accessories.

Six other divisions also performed poorly in March, most notably the electric machinery division and production of glass and non-metallic minerals, which declined 16.7percent and 13.5percent, respectively.

Manufacturers in food and beverages, however, enjoyed positive growth, increasing production by 1percent year-on-year in March.

Investec’s Lara Hodes said manufacturing production in April was projected to have fallen sharply with the strictest level of domestic lockdown imposed in that month.

“A projected significant contraction in gross domestic product in the second quarter of 2020, as well as a slower-than-anticipated recovery in the third quarter, on the back of the severe, protracted nature of the lockdown restrictions and depressed demand environment, does not bode well for the revival the manufacturing sector in the short-term,” Hodes said.

Seasonally adjusted manufacturing production decreased by 2.1 percent in the first quarter of 2020 compared with the fourth quarter of 2019.

Though March’s reading does not reflect the full impact of the Covid-19 linked restrictions, as these were only enforced towards the end of the month, the pandemic and subsequent lockdown restrictions have had an extensive impact on an already dwindling economic activity.

A variety of Purchasing Managers’ Index have shown that South African private sector activity fell to record lows in the first half of this year and was sharper than during the 2008/09 global financial crisis.

Steel and Engineering Industries Federation of Southern Africa economist Marique Kruger said the production data painted a gloomy picture for the economy, which was forecast to contract 7.1percent this year.

“The data does not augur well for businesses, especially considering the tough economic environment and Covid-19 economic crisis, a generally weaker exchange rate and volatile input costs which generally reduce business margins,” she said.

Kruger said it might also be important for the government to reconsider administered prices, which have a bearing on logistics costs.

She said such an intervention was likely to boost consumer demand and have positive spill-over implications for both capacity utilisation and local businesses’ production potential.

BUSINESS REPORT 

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