Press Release - 2015/02/11: METALS AND ENGINEERING SECTOR CONTRACTION CONFIRMS SEIFSA’S FEARS
Speaking after the release of production figures, SEIFSA Chief Economist Henk Langenhoven said that the Federation had previously warned about the combined impacts of production disruptions and unfavourable economic conditions that faced the metals and engineering sector in 2014.
The full-year production data confirmed that the sector had contracted by 2,8% during 2014, when compared with performance in 2013.
“The only highlight of the December data is that on a year-on-year basis, December 2014 was 2,4% higher than December 2013,” Mr Langenhoven said.
He said that only two out of ten of the sub-industries – namely other fabricated metals, and household appliances – had recorded minor expansion over the 12-month period.
“It is clear from the sub-industry performances that they found it particularly difficult to resume normal production in December after the November electricity disruptions,” Mr Langenhoven said.
Over a 12-month period, the respective sub-industries contracted as follows:
- Rubber products – 7,2%,
- Plastics – 3%,
- Basic iron and steel – 0,4%,
- Non-ferrous – 3,9%,
- Structural steel – 7,1%,
- General purpose machinery – 12,3%, and
- Electrical machinery and equipment – 0,7%.
“Therefore, 2014 was a disappointing year. It was expected that growth would resume after the 2% contraction during 2013, but the hope of continued domestic and international economic recovery at the beginning of the year faded during the course of the year,” said Mr Langenhoven.
This meant that production levels were still 25% to 30% lower than they were in the peak of 2007. Employment declined, capacity utilization remained below optimum and profitability declined.
“With neither the demand nor prospects of growth in demand, as well as idle production capacity, profits do not materialize and little investments take place. The potential detrimental impact of the electricity constraints is unknown, but of extreme concern. The cumulative effect of the uncertainties does not bode well for 2015,” concluded Mr Langenhoven.
Press Release - 2015/02/10: SEIFSA STRONGLY OPPOSES IMPOSITION OF ADDITIONAL TAXES ON BUSINESS
Speaking ahead of the State of the Nation Address to be delivered by President Jacob Zuma on Thursday, SEIFSA Chief Executive Officer Kaizer Nyatsumba said that the struggling South African business community – especially in the metals and engineering sector – cannot afford to pay any additional taxes to Government.
“For a developing country struggling for investment, South Africa ranks among countries in the world with relatively high corporate taxes. Businesses in South Africa are already heavily taxed in the form of direct or company taxes as well as a surfeit of indirect taxes,” Mr Nyatsumba said.
His comments come amid speculation that the Minister of Finance might announce a tax hike in this year’s budget in order to close the R27 billion revenue shortfall in the next two years.
The Minister mooted the possibility of a tax increase in October last year, indicating a need to consolidate the budget deficit in the wake of revenue that keeps disappointing due to lower-than-expected economic growth.
“In South Africa, where economic growth is painfully slow and unemployment levels extremely high, the Government would be extremely ill advised to worsen the country’s bleeding economy by imposing additional taxes on business. As things stand right now, business is struggling, with a growing number of companies downsizing,” Mr Nyatsumba said.
He said that, when South Africa is compared with its fellow BRICS countries, only India – with the advantages of a far bigger population size and competitive wages – had a corporate tax higher than South Africa’s. Compared to South Africa’s 28%, Russia’s corporate tax is 20%, Brazil’s and China’s 25%, with India at 33.99%.
Mr Nyatsumba added that the local economy needed to be stimulated through a variety of measures, including local procurement and Government tax breaks, so that it could create more jobs, and not to be hamstrung through more taxes at a time when business is struggling for survival.
Mr Nyatsumba said that, in its efforts to generate more revenue, the Government would have “to be extremely careful to avoid killing or even suffocating the goose that lays the golden egg,” which includes the middle class and high earners.
“In a country with a small tax-paying population, our pre-occupation should be to grow the economy in order to create more employment and to see more people moving to the higher threshold of personal taxes, and not to punish higher income earners by raising taxes,” Mr Nyatsumba said.
Instead, he said, the Government’s priority should be ensuring that every tax rand is used wisely, to the benefit of the country, and that it does not end up in the pockets of some selfish individuals through corruption.
Mr Nyatsumba said that while it was understood that the Government needed more revenue, it could accomplish that goal by ensuring that South Africa was viewed more favourably as a foreign investment destination and by ensuring that greater efficiency existed in all tiers of government, including state-owned companies. He said that options available to the Treasury to raise funds included upward adjustments to the fuel levy and sin taxes, “in addition to better management of public finances”.
Press Release - 2015/02/06: SEIFSA SEES WORRYING TRENDS AHEAD FOR THE METALS AND ENGINEERING SECTOR
Speaking after the release of capacity utilisation figures by Statistics South Africa, SEIFSA Chief Economist Henk Langenhoven said that the fourth-quarter numbers were 2,1% lower than in the same period in 2013 and 3,3 lower than in November 2012. The latter seemed to have been the beginning of a decline.
The average capacity utilisation for the sector had been almost constant at 78,8 for the last three years, against a benchmark of 85%. Mr Langenhoven said under-utilisation of capacity could be ascribed to labour and other production disruptions that took place in 2014.
“Just as it was hoped that these disruptions would have subsided, the electricity constraints started to bite and will have an impact in the foreseeable future,” Mr Langenhoven said.
He added that, specifically in manufacturing, capacity utilisation as an indicator was now an important variable used in studies of countries’ growth potential. He said that, taking this important variable into account, latest South African Reserve Bank and International Monetary Fund studies showed that South Africa’s growth potential had declined from 3,5% to 2,5%.
The metals and engineering sector represents 34% of manufacturing in the country.
Mr Langenhoven said gross operating surplus numbers for the sector (indicative of profit margins) had been negative since 2012. With under-utilisation of current production capacity, within an environment of upward cost pressures, profit margins would be under increased threat.
“If the general outlook for domestic and international growth is not rosy, then it is almost logical that little or no investment will take place,” he said, adding that these were very worrying trends for the sector and the country.
Press Release - 2018/02/05: SEIFSA AWARD WINNERS TO BE HONOURED AT THE INAUGURAL METALS AND ENGINEERING INDABA
The two events, which are certain to become the most crucial on the annual metals and engineering sector calendar, were introduced not only to encourage growth in a sector that has under-performed over the past few years, but also to celebrate excellence in the metals and engineering industries.
SEIFSA Chief Executive Officer Kaizer Nyatsumba said the combination of these two very crucial events will afford both Indaba delegates and Awards guests an opportunity to celebrate excellence in the metals and engineering sector.
He said a number of companies had indicated their intention to submit entries for the Awards, but had expressed concern that the 31 January deadline was too tight. The new closing date for entries is now 17h00 on Friday, 24 April 2015.
Delegates attending the Metals and Engineering Indaba do not need to pay an additional fee to attend the Awards dinner, since dinner was already included in the delegate fee.
The SEIFSA Awards for Excellence offer 10 different categories and manufacturers in metals and engineering operating in Southern Africa are invited to submit their entries. The 10 categories are:
- 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 2014.
- 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 2014.
- Entries are also invited from companies whose Corporate Social Investment (CSI) programme/s in 2014 had a major impact on the lives of its beneficiaries.
- Companies rated the highest in customer service performance in 2014 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 2014. 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 2014.
- 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 2014.
Commenting on the industry awards, SEIFSA Marketing and Communications Executive Adelia Pimentel said: “It is of paramount importance that companies play a crucial role in socio-economic upliftment and that they are recognised for their contributions and encouraged to do more.”
Companies operating in these vital economic sectors are encouraged not only to enter for any one of the categories offered, but also to consider taking up the various marketing opportunities available.
Guests wishing to attend the Awards Dinner only, excluding the Southern African Metals and Engineering Indaba, will find ticket prices on the Awards website www.seifsaawards.co.za.
Press Release - 2015/02/03: SEASONAL FACTORS HELP BOOST JANUARY PMI NUMBERS
The seasonally-adjusted overall PMI improved by 8%, mainly on the back of the business activity sub-index rising by nearly 28% in January. Speaking after the release of the figures, SEIFSA Chief Economist Henk Langenhoven said that the difficulty in interpreting the trends as a guide to future activity was very high.
“When the 12-month movements in both the seasonal adjusted indices is considered, the PMI still declined by 3,6% and the activity index by 5,2%. The leading indicator, which is a ratio between new sales orders and inventories, has declined below 1, which indicates that future activity will be lower,” Mr Langenhoven said.
However, he added that the latest numbers improved further the business activity sub- index level, as well as its rate of change. These indicators had bottomed in the middle of 2014. The January numbers, therefore, eased some of the doubts about prospects for the future.
Mr Langenhoven said that within the context of slowing domestic economic growth, uncertainty about world economic recovery and demand for products of the metals and engineering sector, the electricity constraints and uncertainty created by these factors, SEIFSA would be cautious of the latest seemingly very positive turn of the PMI.
Load Shedding: Management Guidelines
This point is important as with unplanned load shedding, essentially the status quo with regard to the four-hour rule continuous to apply - as opposed to planned load shedding i.e. where there is advance notice and the employer can implement the short-time provisions of the agreement as a response strategy to deal with the planned event.
Furthermore, the position whereby individual employers and their employees may enter into any other mutually acceptable response strategy continues to apply and where agreed and signed-off on does not require the consent of either the union and/or the bargaining council. The reference here is clause 4 of the Main Agreement/ Alternative Working Time Arrangements/ any other alternative working time arrangement agreed between workers and management, effectively meaning that if an agreement is reached no exemption is required.
SEIFSA will be running a series of ½ day workshops where we will advise management on how to deal with load shedding from both an industrial relations and health and safety point of view.
Should you require any further clarity, please contact the SEIFSA Industrial Relations Division on 011 298 9400.
Load Shedding: Management Guidelines
This point is important as with unplanned load shedding, essentially the status quo with regard to the four-hour rule continuous to apply - as opposed to planned load shedding i.e. where there is advance notice and the employer can implement the short-time provisions of the agreement as a response strategy to deal with the planned event.
Furthermore, the position whereby individual employers and their employees may enter into any other mutually acceptable response strategy continues to apply and where agreed and signed-off on does not require the consent of either the union and/or the bargaining council. The reference here is clause 4 of the Main Agreement/ Alternative Working Time Arrangements/ any other alternative working time arrangement agreed between workers and management, effectively meaning that if an agreement is reached no exemption is required.
SEIFSA will be running a series of ½ day workshops where we will advise management on how to deal with load shedding from both an industrial relations and health and safety point of view.
Should you require any further clarity, please contact the SEIFSA Industrial Relations Division on 011 298 9400.
Press Release - 2015/ 01/15: EFFECTS OF ELECTRICITY CONSTRAINTS EVIDENT IN DISCONCERTING PMI NUMBERS
The overall index dropped by 3,3 points in December, which translates into a 5,8% decline. On average, the year ended 4% lower than 2013. The December business activity sub-index of the PMI recorded almost a 14% decline on November 2014. “This is of serious concern as it reflects the expected impact on production trends in the metals and engineering sector,” SEIFSA Chief Economist Henk Langenhoven said.
Mr Langenhoven reiterated SEIFSA’s statement, first made last year, that medium-term trends in the business activity sub-index level and its rate of change seemed to have bottomed up in the middle of 2014.
“The continuation of this improvement is crucial since it leads metals and engineering production trends by 12 to 18 months. Although the trends remained positive, the December numbers have raised uncertainty significantly and may indicate that a substantive recovery will be delayed further than 2015,” said Mr Langenhoven. He added that the declines in all the comparative periods were considerable:
- December was 13,8% lower than November,
- The average for the full year was 7,4% lower than 2013’
- December 2014 was nearly 5% lower than December 2013, and almost certainly indicates continued depressed production numbers for the sector in December.
The positives reflected in the numbers are shown by expected business conditions improving by near 24%, suppliers performing better and order backlogs declining. In contrast, purchasing commitments declined – as did new orders – which shows lower expected demand, the latter supported by the price indicator dropping. This placed the near-exuberance reflected in the expected business conditions in question.
“The December PMI numbers are quite disconcerting, and by all indications mostly reflect the electricity constraint. Urgent and effective interventions are needed from all players. If not, stronger production patterns in the metals and engineering sector will not materialise during 2015,” Mr Langenhoven concluded.
SEIFSA CEO’s AUTOBIOGRAPHY AMONG AMERICAN PUBLISHER’S TOP 20 BEST SELLERS IN NOVEMBER
The book – which is about Nyatsumba’s life and that of his brother and close friend Adonis, who was murdered in Pretoria in 2009 – was published by US-based Strategic Books and Publishing Rights Agency (SBPRA) in September last year and is sold around the world. It is available on Amazon.com and other online retail outlets, including South Africa’s Kalahari.com, as both as a hard copy and an e-book. Nyatsumba’s book was placed 15th on SBPRA’s “November’s Top 20 Best Sellers” list. Ashley Morrison’s The Professor was placed first and Patricia Harmon’s The Mind of an Innovator was placed 20th.
Published under the headline “SBPRA Success Stories”, the list is available on www.sbpra.net/successstories/?tag=best-selling-authors. Nyatsumba said that he was delighted that his book had made it onto the huge US publishing company’s top 20 best-selling books for November. “I am very pleased that my book was among SBPRA’s top sellers in November. I can only hope that it will continue to do well internationally and to be among my publisher’s best sellers,” Nyatsumba said.
Press Release - 2015/01/13: ESKOM POWER WOES HALT METALS AND ENGINEERING SECTOR RECOVERY IN ITS TRACKS
Speaking after the release of the manufacturing production figures by Statistics South Africa, SEIFSA Chief Economist Henk Langenhoven said that the cumulative effect of the production disruptions during 2014 now amounts to a 2,5% contraction (eleven months of 2014 compared to the same period in 2013, bringing the 12 month decline to 2,1% of production).
Mr Langenhoven said that only three out of 10 of the sub-industries – other fabricated metals, special purpose machinery and household appliances – re recorded expansion over the eleven months of 2014.
Over a 12-month period, the more electricity-intensive sub-industries contracted as follows:
- Rubber products -5,9%,
- Plastics -2%,
- Basic iron and steel -0,9%,
- Non-ferrous -3,6%,
- Structural steel -6,3%,
- General purpose machinery -13%, and
- Electrical machinery and equipment -1,9%
Mr Langenhoven reiterated SEIFSA’s previous estimate that electricity disruptions (under certain assumptions) as seen during November 2014 had the potential to wipe out up to 23% of production in the sector.
“The warnings from Eskom regarding the possibility of such occurrences during the year are of huge concern. The actual November production numbers are better than expected, but if the situation repeats itself during 2015, the calculations may prove ominously close to reality,” Mr Langenhoven said.
While growth of more than 2% was hoped for during 2014 on 2013, the reality seemed to be a contraction of more than 2%.
“Representing 34% of manufacturing production, these numbers drive home the importance of recovery in the sector for manufacturing to gain momentum,” Mr Langenhoven concluded.