The metals and engineering sector’s ongoing journey to recovery from the 2007/ 2008 global financial crisis has been a long and difficult one.
Since the global financial crisis, the metals and engineering sector is among industries that have struggled to bounce back. Instead, there have been downward trajectories for production, employment, investment and profit. Market conditions have hardly improved this year. Recent Producer Price Index (PPI) data by Statistics South Africa reinforces the sector’s gloomy outlook and the battle for sustained recovery.
The annual percentage change in the PPI for intermediate manufactured goods was 1.5% in July 2017, compared with 2.1% in June 2017. This does not bode well for producers in an economy stuck in low growth and generally rising input costs. It leaves no leeway for manufacturers to pass increases onto the market.
Moreover, manufacturers in the sector compete with cheap,
often subsidised imports from
The influx of imports at the expense of domestic suppliers is among the key drivers of lower capacity utilization and investment in the sector. We need an urgent intervention to protect the sector. We would like to see bolder government policy interventions to support the metals and engineering sector, hence we agitate for an agile and responsive policy environment.
Rigid and non-responsive policies can only constrain the sector and delay its ability to recover sufficiently to be able to support other key sectors of the economy. SEIFSA will continue to lobby, on behalf of its members, for government policies that advance the interests of the sector.
Against the backdrop of the many challenges it faces, the metals and engineering sector can either wallow in self-pity or pull itself by its bootstraps and seek actionable solutions. We choose the latter. In our view, this is not the time for us collectively to bury our heads in the sand. We believe that we need to have the courage to tackle our challenges head on for the sake of the sector’s survival and sustainability.
Other than its contribution to the Gross Domestic Product (GDP), the metals and engineering sector has vital links to key sectors such as mining, automotive, construction and petrochemicals. Therefore, the sector, which constitutes 30% of total manufacturing and employs approximately 427 523 people, is too important to be allowed to fail.
Speaking at the 2016 Southern African Metals and Engineering Indaba, former Finance Minister Pravin Gordhan said in a speech read for him by former Treasury Director-General Lungisa Fuzile that the government was aware of the importance of the metals products sub sector.
He highlighted the strategic nature of the steel industry, not only because it represents about 1.5 per cent of the GDP and has indirect linkages to other sectors comprising a significant 15 percent of GDP and employing 8 million people, but also because it is unique in sub-Saharan Africa, critical to industrialisation and vital to the growth drivers outlined in the Industrial Policy Action Plan, the National Development Plan and the Nine-Point Plan.
The two-day, third Southern African Metals and Engineering Indaba, which commences on Thursday, is an opportunity for business executives, entrepreneurs, decision and policy makers, investors and trade union representatives to collaborate towards addressing the challenges facing the sector. We are confident that this year’s Indaba will build on the success of the previous two conferences by narrowing the trust deficit between the government, business and labour.
It is our strongly-held view that for us to get the solutions we are looking for, there must be genuine commitment to a meaningful, constructive and continuous dialogue. We must create space for meaningful engagement between and among the different social partners. We hold strongly the view that two minds are much better than one. So, in the search for solutions to the sector’s challenges, we have to take important stakeholders such as government and labour along.
We believe that all who love this country will concur that ultimately South Africa needs a metals and engineering sector that is vibrant and competitive, notwithstanding the enormous challenges generally facing the South African economy.
Kaizer Nyatsumba is the CEO of SEIFSA. For more information on the Indaba, click here.
- BUSINESS REPORT