Supply chain constraints dampen manufacturing confidence
SUPPLY chain constraints as a result of global restrictions imposed to curb the spread of Covid-19 have left South Africa’s manufacturing sector reeling.
The first-quarter Absa Manufacturing Survey released yesterday showed that manufacturing business confidence plunged to 25 index points in the first quarter after two consecutive increases brought sentiment to 31 points in the fourth quarter last year.
Absa said only a quarter of respondents were satisfied with prevailing business conditions.
The quarterly survey, which covers about 700 businesses in the manufacturing sector, was conducted by the Bureau for Economic Research between January and March 1 this year.
Absa said manufacturers highlighted raw material shortages as a serious impediment to activities for the second quarter in a row.
Absa Retail and Business Bank’s head of the manufacturing sector, Justin Schmidt, said that manufacturers were still reporting constrained supply chains. Schmidt said issues in the supply chain were resulting in raw material shortage constraints, which were negatively affecting their production processes.
“Currently, a major problem globally appears to be the supply of shipping containers and vessels across routes, including to and from South Africa,” Schmidt said.
“Whilst manufacturers remain hopeful that this will be resolved within the quarter, the risk of successive Covid-19 waves around the globe and further lockdown restrictions is a major concern.”
Absa said in spite of the second wave having passed, the higher intensity of load shedding, as well as raw material shortages, were the reasons overall confidence 25 points.
Schmidt said many manufacturers closed during December and January, and there was often a dip in production volumes over this period.
“This year, however, load shedding, as well as the introduction of adjusted level 3 lockdown restrictions, notably the alcohol ban, have been a major drag on production,” Schmidt said.
The February production data was expected to provide a good indication of the sector’s production recovery.
BRICS Manufacturing Working Group chairperson Kaizer Nyatsumba said local production manufacturing fell from 31 to needed massive growth to counter the negative impact of Covid-19 and a market for locally manufactured products beyond the borders of an economically strained South Africa.
Nyatsumba said there was significant potential for South Africa to increase its exports to other countries, particularly its trading partners within the BRICS group.
“We are confident that, notwithstanding the considerable challenges which have confronted it over the years, South Africa’s manufacturing sector has the potential to do much better than it is doing at the moment,” Nyatsumba said.
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