JOHANNESBURG, 12th OCTOBER 2021 – The Steel and Engineering Federation of Southern Africa (SEIFSA), welcomed the increase in the growth rate patterns in the metals and engineering (M&E) sector’s production and sales data for the month of August 2021, indicating that, notwithstanding coming off a low base, there are the beginnings of promising indicators in manufacturing sector.
According to manufacturing data released by Statistics South Africa (StatsSA), total manufacturing production improved by 1.8 percent on a year-on-year basis in August 2021, when compared to August 2020, with a month-on-month increase of 7.6 percent from July 2021. Total manufacturing sales increased by 10.9 percent year-on-year in August 2021, with a month-on-month increase of 10.3% from July 2021. Year to date, manufacturing production increased by 11.6 percent, while sales improved by 22.8 percent.
Within the metals and engineering sub-sectors of the manufacturing sector, which accounts for 29% share in total manufacturing production, total production across the 13 sub-categories increased by an average of 9.4 percent in August 2021 year-on-year, with total sales increasing by a high 19.8 percent to reach R79.3 billion in August 2021, with the largest sales value being in the non-ferrous metal products at R18.8 billion. This is augurs well with ABSA Purchasing Managers Index (PMI) tracking industrial activity recovering to 57.9 index level in the month of August 2021 following the impact of the unrest in the month of July 2021.
While the current production data is positive news and encouraging, SEIFSA expects that production and growth patterns to be significantly lower in the months ahead due to disruptions such as a likely COVID-19 fourth wave, persistent and on-going load shedding, and the industrial action in the M&E sector.
SEIFSA is concerned that the industrial action within the sector, poses a huge threat to the South African economic growth recovery project and the steel industry at large, as production and operational activities in most companies have been severely negatively affected.
With the country moving to adjusted lockdown level one restrictions this is the period where companies should be leveraging on these relaxed restrictions; boosting production in line with demand and increasing capacity utilization levels.
If the industrial action continues into the coming weeks, it will deter the recovery of the beleaguered sector immensely. If steel companies are not operational and no production is taking place, there will be further strains on companies to stay afloat amid the high steel prices they are incurring and the implications will inevitably lead to even more job losses which the industry can ill afford.
As one of the backbone sectors of the South African economy, the M&E sector remains a crucial supplier of inputs into major sectors such as construction, mining and other manufacturing sub-industries, and is thus an integral part of economic and industrial development in South Africa. It therefore, remains imperative that wage negotiations be finalised as soon as possible to avoid a repeat of the 2014 episode which cost the South African economy R6 billion to gross domestic product (GDP).