Roy Cokayne

The government’s approach to labour and industrial action was to try and manage the situation or do nothing, which would promote the failure of the economy, Coenraad Bezuidenhout, the executive director of the Manufacturing Circle, said yesterday.

Commenting on the risks posed to the manufacturing sector by the 0.6 percent quarter-on-quarter contraction in South Africa’s gross domestic product (GDP) in the first three months of this year, he said it would ultimately result in jobs being lost and manufacturers moving to mechanisation and protecting their margins in times of volatile demand.

The contraction in GDP, an annualised and seasonally adjusted figure, resulted from the impact of industrial action in the mining sector, with Statistics SA figures revealing it was driven by a 24.7 percent slump in mining and a 4.4 percent drop in manufacturing output.

“The mining and agricultural sectors have caused havoc to the industrial sector in the last year or so. These sectors are important to manufac-turing because the manufacturing sector is a supplier to them and is supplied by them.”

Bezuidenhout stressed that all segments of the manufacturing value chain were at risk. He said mining and component manufacturers might be more directly hit by the instability in the mining industry but the economic impact would be felt by all, including large and small businesses, because of the loss of income and the impact on consumers.

“We need to see leadership on the economy and the labour issue. We need the instability in labour to be addressed. The government needs to step forward and pronounce on matters in a decisive and assertive way and show leadership that benefits the economy,” he said.

Henk Langenhoven, the chief economist for the Steel and Engineering Industries Federation of Southern Africa, stressed that the best way to improve the country’s growth rate was through policy continuity and resolving the instability in the labour market.

He said the dilemma facing the country was that it was experiencing low growth and higher inflation, which caused uncertainty on interest rates. He said the Reserve Bank was correct to keep interest rates stable, adding that although the metals and engineering sector was faring better than many others, an interest rate hike would have damaged the outlook further.

Langenhoven said the 4.4 percent decline in the manufacturing sector was a shock as no real contraction had been seen for a while, but the future looked promising despite the worrying short-term trend.

However, he warned that confidence, which reflected the immediate economic outlook, was waning and disruptions in production could “make this a self-fulfilling prophecy”.

BMI Building Research Strategy Consulting principal consultant Llewellyn Lewis said the GDP growth figure was a derived number and the result of all the parameters feeding into it, including gross fixed capital formation, construction and residential and non-residential building.

He said the decline in building plans passed had been arrested and this indicator was now moving sideways with some growth while buildings completed had also bottomed and were beginning to increase.

However, he believed the construction industry would decline this year but still make a positive contribution towards GDP growth because many large projects had or would be completed and were being replaced by smaller projects.