Latest News

Press Release - 2015/11/11: METALS AND ENGINEERING SECTOR CONTINUES TO CONTRACT

SEIFSA Chief Economist Henk Langenhoven said that any signs of a levelling off were keenly awaited. The fact that monthly production in September was 3,5% higher than in August 2015 was a sign of hope, which resulted in third-quarter production being 0,23% higher than in the second quarter and nearly 1% higher than in the third quarter of 2014.

“The instability in these numbers is mainly due to the 2014 base effect of the strikes.

If these are signs of a levelling off, it does not mean a lower turning point has been reached.

The forward-looking confidence indicators are still pointing downwards, and any real recovery might have been postponed to the second half of 2016,” Mr Langenhoven said.

Wild fluctuations in performance among the different sub-industries were very evident:

• All sub-industries had positive growth when September 2015 is compared with August 2015, except rubber products (-8,6%) and general machinery (-5%)resulting in the overall year-on-year growth of 3,5%.
• The reverse was almost true when September 2015 is compared with the same month in 2014; all sub-industries recorded declines, except electrical equipment and machinery (+9,6%), household appliances (+8,6%), structural metals (+7,5%) and special machinery (+2,4%), which resulted in an overall decline (-3,3%).
• The latter was true when nine months of 2015 and the last 12 months (ending in September 2015) were compared with the previous periods, resulting in the 2% decline mentioned above.

Mr Langenhoven said that recently a lot of attention has been focussed on important sectors which are demand drivers for metals and engineering sector products. This boded well for the sector over the medium to longer term.

Although exports were not performing well owing to the worldwide commodities slump, great practical efforts were being made to secure the African Growth and Opportunity Act access to the United States markets. This would support the auto exports and, indirectly, the metals and engineering sector.

Mr Langenhoven was also optimistic that the Mining Phakisa process also had the potential to distil real and effective plans to set the mining sector on a course for growth.

“As recently as this week, the Department of Trade and Industry (Dti) announced an adjusted and more favourable dispensation around accessibility for investors to the automotive production and development programme incentives. This also bodes well for the M&E sector,” he said.

Mr Langenhoven said that although a lot of attention had been given to the metals and engineering sector by the Ministry of Trade and Industry, the latest policy signals had been confusing: on the one hand the Ministry had declared the sector distressed, but President Jacob Zuma’s Nine-Point Plan had declared it a potential growth focus.

Additionally, while the Ministry has suspended applications for Manufacturing Competitiveness Enhancement Programme access, it has also allocated R300 million more from its normal budget for the sector.

“There is, therefore, a need to formulate a consolidated and creditable policy stance for the sector. In the meantime, the actual, short-term data for metals and engineering, read in conjunction with the lack of confidence reflected by several indicators, mean that a lower turning point is not in sight yet,” Mr Langenhoven said.

by SEIFSA .

Press Release - 2015/11/09: SOUTH AFRICAN ECONOMY ON THE VERGE OF A RECESSION

This has been a strain on South Africa’s actual economic growth and raises questions about whether the economy is not headed for a recession, the Steel and Engineering Industries Federation of Southern Africa said today. SEIFSA Chief Economist Henk Langenhoven said that the latest manufacturing capacity utilisation data indicate that the situation worsened to 5% below optimum during the third quarter of 2015, which turned out to be the worst of the three quarters this year.

Mr Langenhoven said that, read in conjunction with the latest electricity production figures also released last week, a similar deteriorating trend was observed for the third quarter. The three-month average electricity production fell by 1,3% during the second quarter, which was exactly the same as the decline in gross domestic production (GDP) in that quarter.

“The latest data show an average contraction of 1,9% for the third quarter. This is very concerning in light of the imminent release of GDP numbers for the third quarter,” Mr Langenhoven said.

A similar, deteriorating third-quarter trend was evident in the overall Barclays purchasing managers’ index (PMI). Mr Langenhoven remarked that although over the first 10 months of the year the PMI was 2% higher than during the same period in 2014, the data seem to indicate that conditions have deteriorated since the middle of 2015. The seasonally-adjusted overall index declined by 3,6% in October compared to September 2015, and by 3% on October 2014, he said.

In comparison to manufacturing, the metals and engineering sector capacity utilisation was at nearly 10% below optimum, and has also deteriorated by 2% when the first three quarters of 2015 are compared with the first three quarters of 2014. Capacity utilisation during the third quarter of 2015 was even lower (-4,2%) than that during the strike-affected third quarter of 2014.

Looking for signs of possible improvement into the future, the business activity sub-index of the PMI is useful as it leads actual metals and engineering production by one- and-a-half years. For the first 10 months of 2015 compared to 2014, this indicator improved by 5,5%.

Over a 12-month period the improvement was 4,5%. Both these comparisons show the base effect of the 2014 strike and electricity disruptions. Mr Langenhoven said that, looking closer at the trend followed by the business activity sub-index since July 2015, it revealed a near-10% decline to October.

He warned that if this pattern continued, recovery in the metals and engineering sector would be postponed further to the end of 2016, contrary to earlier expectations. “The metals and engineering sector represent 28% of manufacturing and has been in recession since the middle of 2014.

The current data show little evidence of recovery. Manufacturing has had two quarters of decline since the fourth quarter of 2014, and the latest data releases also indicate a third-quarter decline.

This may indicate that the overall economy will also be in recession when third-quarter data are published,” Mr Langenhoven concluded. SEIFSA is a national Federation representing 27 independent employer associations in the metal and engineering industries, with a combined membership of over 2 000 companies employing over 200 000 employees.

The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.  

by SEIFSA .

Press Release - 2015/10/22: MEASURES TO STIMULATE THE ECONOMY UNLIKELY TO ACHIEVE THEIR OBJECTIVES

Mr Langenhoven said that despite undertakings by Mr Nene in his budget speech in February to stimulate economic growth and to keep a tight rein on Government spending, there had been lacklustre growth and the public wage bill had grown by two percent faster than inflation.

“These developments have left the Minister with virtually no policy space to stimulate the economy. One gets the feeling that he is simply buying time and accepting lower growth in economic expansion and investment for the next two years,” Mr Langenhoven said.

He said that the structural reforms that were needed to accelerate growth all related to capital expenditure that would only have an impact over the medium to longer term. These included a long list of projects, but Minister Nene pointed out that capital spending had declined in real terms and that capital transfers to local authorities – which had the least capacity to implement programmes – had grown.

“The project to re-establish a national capital budgeting framework probably had the most potential over the longer term, but there appears to be a national consolidation plan for capital expenditure budgets, at a time when localised integrated development plans were not successful in the past,” Mr Langenhoven said.

He added that the other side of the coin of lower capital expenditure was Mr Nene’s predicament to contain the impact of above-inflation growth in personnel-intensive sectors such as health, education and security. He said that spending under the economic classification heading of “economic affairs” had grown by 5,9%, with “industrial development and trade” faring the worst with a 4,7% higher allocation.

“The result of the low economic growth and exploding personnel cost dynamics is that deficit reduction has been postponed yet again. The consolidated debt-to-GDP ratios expected to stabilise at 49%, higher than previously thought. Secondly, the deficit before borrowing will be marginally lower than expected this year (3,8% instead of 3,9%), but higher in the following years: 3,3% for 2016/17 instead of 2,6%, 3,2% for 2017/18 instead of 2,5% and 3% by 2018/19,” Mr Langenhoven said.

He said that the primary deficit has been negative since 2008/9 and was hard to eliminate. He said that although there were plans to reduce it, the fact that South Africa was bad when it came to implementation of its plans will eventually erode confidence.

Mr Langenhoven said that the Federation was very concerned that the latest statements and proposed legislation emanating from the African National Congress’s recent National General Conference would elevate the risks to ownership of assets/companies in the economy, “on top of the severe lack of business confidence in the private sector”. He said that such an approach was likely to result in even lower-than-expected investment and. in turn, lower economic growth.

“The medium-term budget policy statement shows the dilemma of low economic growth and the lack of fiscal space to address it. This may well be the time for South Africa to consider relaxing monetary policy, in line with other commodity-dependant countries in order to spark growth,” Mr Langenhoven concluded.

by SEIFSA .

Press Release - 2015/10/21: INNOVATION KEY TO REVIVING SOUTH AFRICA’S MANUFACTURING SECTOR

Mr Nyatsumba said that the South African manufacturing sector was going through a structural adjustment phase, rather than a cyclical downturn. A rethink of South Africa’s approach to manufacturing was, therefore, most crucial.

“The metals and engineering sector is without doubt going through a fundamental structural adjustment, not just a cyclical correction. The sector almost doubled in size over a 14-year period from 1994 until the international financial crisis of 2008-2009 hit South Africa, resulting in a 21% contraction in output that year. Since then the sector expanded by about 6%, but the level of value added to the economy today is still 16% lower and output is 25% lower than it was during the peak of 2007/8,” Mr Nyatsumba said.

The extreme volatility in the economic environment since 2007 made planning very difficult. In addition, prices for South African metal sector exports were also depressed and could continue to be so for a long time. Research showed that metal price cycles last on average 35 years. The latest cycle started in 1999 and reached its peak in 2007 and the downswing had already lasted seven years. This meant that there could still be another 10 to even 20 years of depressed markets ahead.

Mr Nyatsumba said that domestically the sector was critically linked to the mining, construction and auto sectors, which as a group directly contributed 17% (R570 billion) to South Africa’s GDP in 2014 and, depending on the indirect and induced multipliers, up to twice this number.

“These vital sectors are one another’s customers and suppliers, which means that instability affecting one sector inevitably affects the others.”

Furthermore, these four sectors were very electricity intensive and were almost equally hard hit by electricity outages which disrupt production, lead to under-utilisation of production capacity and higher costs, substitution of locally-manufactured products by imports, the threat of not fulfilling export orders and losing contracts, as well as uncertainty about the viability of fixed investment.

Mr Nyatsumba said that the consequences of the rise of China and India, as well as the structural adjustments taking place in those economies, will be significant.

“There are massive surpluses generated in those markets, which find their way onto the world market. The current rebalancing taking place will shift their input demand patterns downward permanently. Demand out of Africa could decline in sync, due to its dependence on Chinese demand for its commodities for its own growth.”

“For recovery to commence in the sector, export markets need to recover and domestic demand from mining, the automotive sector and construction has to resume. Far more important, however, was the need for South African manufacturing in general and the metals and engineering and related sectors in particular to be much more efficient in their production processes in order to be competitive internationally.

“While there are certain factors that are not within their control – such as the comparative cost of South African labour, power supply and various administered costs – local manufacturers will have to do more about those factors that are within their control. Inevitably this will mean embracing advanced manufacturing methods and processes and investing in latest, more efficient technologies. In the end, that will be the only way to ensure higher levels of international competitiveness than is the case at the moment,” Mr Nyatsumba said.
Regrettably, higher levels of mechanisation would have adverse effects on job creation, at a time when South Africa needs more jobs to be created. It would, therefore, be vital for the Government and its various agencies like the SETAs to invest heavily in up-skilling and re-skilling the general South African workforce to place it in a position to operate high-technology machines and to get jobs in the resulting adjacent sectors.
Equally important to prevent the manufacturing sector from withering into oblivion were policy adjustments from Government and cohesion between business and labour.

“We are in uncharted waters. Cooperation amongst business, government and labour to find solutions is critical. We are encouraged by recent approaches to tackle the current steel crisis, and we can only hope for more such trilateral approaches in future. Only such an approach will stand a good chance of lasting success,” Mr Nyatsumba concluded.

by SEIFSA .

Press Release - 2015/10/19: SEIFSA BEGINS SEARCH FOR 2015 TOP PERFORMING COMPANIES

Born out of the need to encourage growth and celebrate excellence in the metals and engineering sector, the SEIFSA Awards for Excellence offer a great opportunity for companies operating in this vital sector to receive well-deserved recognition by industry peers for their capabilities, expertise and innovation.

SEIFSA Chief Executive Officer Kaizer Nyatsumba said that the metals and engineering sector was faced with several challenges, including the prevalence of cheap imports from Asia, the lack of competitiveness in local manufacturing and policy uncertainty.

“In such turbulent economic times and a challenging business environment, we at SEIFSA believe that it is critically important for those companies which excel at what they do to get the acknowledgement and recognition that they deserve,” Mr Nyatsumba said.

The SEIFSA Awards for Excellence offer seven different categories, namely:

The Most Innovative Company of the Year, which will be awarded to a company which showed the highest level of innovation in research and development or production in 2015.

The Health and Safety Award of the Year will be offered to a company with the best legal compliance record in Health and Safety or the lowest Lost-Time Injury Frequency Rate in 2015.

Entries are also invited from companies whose Corporate Social Investment (CSI) programme/s in 2015 had a major impact on the lives of their beneficiaries.

Companies rated the highest in customer service performance in 2015 will receive the Customer Service Award of the Year.

The Most Transformed Company of the Year Award will be received by a company that showed the highest transformation level in the composition of its Board of Directors, Executive Management and Managerial Team in 2015. This award category pits companies employing fewer than 100 people against those of similar size, and companies employing more than 100 companies against others of similar size.

This is the Decade of the Artisan, and an award will be made to the company that trained the highest number of artisans in 2015.

The Environment Stewardship Award will go to a company that has made the biggest or best strides towards conserving the environment or mitigating the impact of its operations on the environment in 2015.

Mr Nyatsumba has encouraged manufacturers operating in the metals and engineering sector to submit their entries for the seven categories as soon as possible. The Awards are open to both SEIFSA members and non-members.

Winners will be honoured in a ceremony that will take place on the first day of the twoday Southern African Metals and Engineering Indaba, scheduled to take place on 26 and 27 May 2016 at Emperors Palace, in Ekurhuleni.

Last year’s winners included Scaw Metals, ABB Group, Hazelton Pumps International and Voith Turbo, among others.

by SEIFSA .

Press Release - 2015/10/12: HISTORY MADE AS SEIFSA APPOINTS ITS FIRST WOMAN PRESIDENT

Commenting on her appointment, the deeply appreciative Ms Dick – who is also the Vice President of the Confederation of Associations in the Private Employment Sector, a Director of Business Unity South Africa and for seven years Chairman of its Trade Policy Committee – said: “I am truly humbled that a giant such as SEIFSA would consider and ultimately appoint me to this important position. It is a task that I accept and will embrace wholeheartedly.”

Although Ms Dick acknowledges that the road ahead will not be easy given the challenges currently facing the metals and engineering sector, she is adamant that as long as the Government, labour and business work together, there is hope that the fortunes of the sector can be turned around.

“The road ahead is certainly going to be a very challenging one, but the key is not to give up. We must work together with all the stakeholders within the sector to find solutions that will ensure growth and sustainability of the sector,” Ms Dick said.

SEIFSA Chief Executive Officer Kaizer Nyatsumba welcomed Ms Dick’s election and thanked Mr Khumalo for his “excellent service to the Federation and the sector”.

“Ms Dick is a very accomplished business leader who will certainly make a major contribution to the industry in her new capacity as President. SEIFSA will benefit immensely from her enormous experience and her wealth of contacts in various business sectors. My colleagues and I look forward to working with her.

“In the same breath, I would like to thank Mr Khumalo for his excellent leadership of the Federation during his presidency,” Mr Nyatsumba said.

Ms Dick’s Vice Presidents are Babcock International Company Secretary Mr Neil Penson and Macsteel Services Centres Chief Executive Officer Mr Hannes van der Walt. Other board members are of Zimco Aluminium Company Sales and Marketing Director Mr Bob Stone, ABB South Africa CEO Mr Leon Viljoen, Scamont Engineering Director Mr Ross Williams and Southey Holdings Technical Director Mr Ben Garrad.

by SEIFSA .

Press Release - 2015/10/09: NO END IN SIGHT TO METALS AND ENGINEERING SECTOR’S WOES

Speaking after the release of production numbers by Statistics South Africa, SEIFSA Chief Economist Henk Langenhoven said that it was very worrying that production in the sector fell by nearly 4% in August when compared to July this year and by 8% when compared to the same period last year. Production data for the first eight months of the year showed a 1,4% decline and a 1,8% decline over the 12-month period ending in August this year.

Both readings are worse than in July.

Forward-looking confidence indicators also point to tougher conditions ahead;

• Although the Bureau for Economic Research’s (BER) third-quarter manufacturing survey shows a slight improvement in confidence for manufacturing in the third quarter, the expected business conditions in 12 months deteriorated markedly;
• This is in line with the monthly business activity sub-index of the Purchasing Managers Index, which declined further in September;
• This is is supported by the BER’s overall business confidence index, which showed that sales of intermediary goods (chemicals, basic metals and metal products) as well as capital goods (transport and machinery and equipment) contracted in the third quarter.

“This picture is consistent with our warning that these indicators pointed to worse production numbers for August, and almost certainly for September as well. Anecdotal evidence from SEIFSA members in this regard is most disturbing,” Mr Langenhoven said.

Wild fluctuations in performance amongst the different sub-industries are still evident when August 2015 is compared with August 2014.

A similar comparison between August and July reveals an identical problem. Only rubber (+8%), plastics (+0,9%) and general machinery (+6,2%) production improved during the month.

Twelve-month seasonally-adjusted comparisons show more consistent results, although they also vary from a +3,7% (electrical machinery and equipment) improvement to a decline (in non-ferrous production) of 6,8%. The results were as follows (in declining order of performance):

• Electrical machinery and equipment – 3,7%;
• Special Machinery – 2,2%;
• Other fabricated metal products – 0,6%;
• Rubber – no movement;
• Household appliances – -1,9%;
• Basic iron and steel – -1,7%;
• Plastics – -2,9%;
• General purpose machinery – -4,6%;
• Structural steel - -4,7%;
• Non-ferrous - -6,8%.

Mr Langenhoven said that, read in conjunction with the lack of confidence reflected in several indicators, the latest data for the metals and engineering sector mean that a lower turning point is not in sight yet.

“There is renewed uncertainty about international economic recovery, with the International Monetary Fund warning about lower growth and vulnerability of commodity-dependent and undiversified economies. South Africa’s mining production was 3,3% lower over the last three months (up to August) compared to the previous three months (and the coal miners are on strike), and domestic auto sales have deteriorated further. Construction activity has not been encouraging either,” Mr Langenhoven said.

He said that higher local content in domestic procurement by the public sector can help to turn the situation in the metals and engineering sector around.

“However, it is very disturbing to hear of contracts being awarded to Indian and European suppliers when capacity exists locally,” Mr Langenhoven concluded.

by SEIFSA .

NUMSA’S INTENDED PROTEST ACTION ON 14 OCTOBER 2015

INTRODUCTION

Management will be aware, from recent media reports, that the National Union of Metalworkers of South Africa (Numsa) is preparing for a protest action in the form of a national stay-away and other forms of protest activity on Wednesday, 14 October 2015.

This Management Brief provides some basic background to the issue and guidance to management in dealing with the intended protest action.

PROTEST ACTION AND THE LABOUR RELATIONS ACT

The Labour Relations Act (LRA) permits registered trade unions, such as Numsa, to undertake protected protest action to promote the social and economic interests of workers, provided that they observe the procedural requirements contained in Section 77 of the LRA.

The primary respondent in the Section 77 application brought by Numsa is the Government, specifically the National Treasury. However, Business has also been cited as a respondent.

Nedlac received a notice of possible protest action on 8 July 2015 from Numsa. The notice outlined Numsa’s demands in respect of the increasing levels of corruption in South Africa, and cited the following respondents:

• Government: The Presidency and National Treasury; and
• Business Unity South Africa

The Nedlac Section 77 Standing Committee met with Numsa on 20 July 2015, in order to obtain further details on the notice. A revised notice was submitted by Numsa on 5 August 2015. The Committee subsequently determined the notice to be compliant with the administrative requirements of the LRA.

The Committee convened a meeting, to consider the notice, jointly with Numsa on 4 September 2015. At this meeting the Committee concluded that this matter could not be deemed as having been sufficiently considered.

The Standing Committee met again with Numsa on 25 September 2015. At this meeting the Committee confirmed the notice as having been considered to be in compliance with Section 77 (1)(c) of the LRA.

The Committee further confirmed that should Numsa wish to engage in any form of protected protest action, the requisite 14-day notice must take place within 14 days or later from 25 September 2015.

It is important to note that protest action in terms of Section 77 of the LRA is only protected if the issue in dispute has been considered by Nedlac and the union concerned has given to Nedlac 14 days’ notice of its intention to proceed with such protest action on. In the absence of these conditions, any protest action would not be protected.

It has now been confirmed that Numsa has filed a Section 77(1)(d) notice with Nedlac, advising of its intention to participate in a socio-economic strike on 14 October 2015 against corruption and to conduct rallies, marches, demonstrations and pickets. Effectively this means that this would be deemed to be a protected strike.

Consequently, Numsa members participating in any form of stay-away or protest activity on 14 October will be protected by the normal rules regarding protected protest action to promote or defend socio-economic interest of workers, namely: no-work-no-pay and no-disciplinary action.

RECOMMENDED MANAGEMENT ACTION

SEIFSA recommends that management adopt the following course of action in dealing with any stay-away on 14 October 2015:

• Inform all workers that any absences related to the protest action will be treated on the following basis:
  • No work, no pay, no disciplinary action; 
  • A shift for leave pay and leave enhancement pay qualification purposes will be lost in respect of the day’s absence; and
  • Any overtime worked during the course of the week will be paid at ordinary rates to make up for the lost ordinary working hours on 14 October 2015. 
• It is furthermore recommended that you consider the possibility of agreeing to an alternative working time arrangement to a worker stay-away by, for example, reaching agreement with employees that only the shop stewards participate in the stay-away on the basis that they will not forfeit pay, on condition that all members present themselves for work on 14 October 2015. Alternatively, that lunchtime demonstrations replace the stay-away action.

The staff of the SEIFSA Industrial Relations and Legal Services Division are available to provide further advice or assistance to management in this regard.

by SEIFSA .

Press Release - 2015/10/05: SEIFSA CHIEF ECONOMIST APPOINTED TO THE ITAC COMMISSION

ITAC was established to foster economic growth and development in order to raise income and promote investment and employment in South Africa. It strives to create an enabling environment for international fair trade through technical advice to the Ministries of Economic Development and Trade and Industries. Its core functions are customs tariff investigations, trade remedies and import and export control.

As a member of the Commission, Mr Langenhoven will be part of the team whose role entails the evaluation of investigations conducted by ITAC employees and recommendations to the Ministers responsible. As an economist, Mr Langenhoven will join specialists from diverse backgrounds, including agriculture, other business disciplines, international trade law and labour.

Informing Mr Langenhoven of his appointment, Minister of Economic Development Ebrahim Patel wrote: “I thank you in advance for your commitment to the work of ITAC and wish you all the best in what I am confident will be an exciting and interesting period in the evolution of trade policy.”

Mr Langenhoven is also an active participant in various business forums such as Nedlac, Business Unity South Africa and the South African Reserve Bank economic roundtable discussions, amongst others.

In addition to Mr Langenhoven’s appointment, SEIFSA Operations Director Lucio Trentini has recently been appointed a member of the CCMA Governing Body as well as a member of the Nedlac Labour Market Chamber, while SEIFSA Human Capital and Skills Development Executive Mustak Ally was appointed to the Manufacturing, Engineering and related services SETA and the National Skills Development Boards.

Commenting on the appointments of Messrs Langenhoven, Trentini and Ally, SEIFSA Chief Executive Officer Kaizer Nyatsumba said: “These important appointments confirm SEIFSA’s position as the undisputed voice of the metals and engineering sector in the country.

I am grateful to these Ministers for their recognition of the enormous expertise that resides within SEIFSA, which is available to serve not only the Federation’s interests, but also those of our country as a whole.

“I have no doubt that these colleagues will add enormous value in the deliberations of the bodies on whose Boards they sit. Their appointments onto key statutory bodies gives effect to our vision to promote sustainable metals and engineering industries and to ensure that they are strategically positioned for innovation and growth in the interests of a prospering South Africa.”

by SEIFSA .