Managing The Impact of Administered Prices for M&E Sector’s Survival and Global Competitiveness

Johannesburg, 1 September 2019 – As the South African economy continues to struggle to grow, businesses in the manufacturing sector also continue to face headwinds, including increasing logistics and input costs, which impact negatively on production and job creation.

“High transportation costs, including rail and road, are increasingly adding pressure on businesses. Increasing electricity costs also impact negatively on the cost of doing business, especially for those companies  operating in the M&E cluster of industries,” Steel and Engineering Industries Federation of Southern Africa Chief Economist, Dr Michael Ade, said.

He said that electricity costs represent, on average, just over three percent or R14.9 billion of intermediary inputs for the (M&E) cluster and varying percentages of turnover recorded in the basic iron and steel products (10.64 percent), the basic non-ferrous metals (2.19 percent) and rubber (1.22 percent). For some basic metals companies, such as smelters and foundries, this can be a significant portion of their input costs, thereby restricting future production capacity.

In addition to continually rising transport and electricity costs, Dr Ade said that the tariffs charged at South African ports are among the highest globally. The South African port system comprises both multi-purpose ports (Durban, Cape Town, Port Elizabeth and East London) and specialised bulk ports (Saldanha, Richards Bay and Mossel Bay), as well as a port developed predominantly for future transshipment cargo – Ngqura. Therefore, being a multi-port authority adds to costs and also makes it hard to benchmark against other ports globally.

“Inefficiencies at the hinterland are often transferred to the ports, adding difficulties in the operating environment at ports. This invariably adds to delays and additional costs at the ports,” Dr Ade said.

He said it is very important that logistics and rising input costs are contained in order to reduce overall production costs, which may ultimately lead to more job losses and the closure of strategic industries, including those of the metals and engineering sector.

But how can we change the negative impact that administered prices have on the manufacturing sector? That is the question to take centre stage at the upcoming Southern African Metals and Engineering Indaba taking place on 12 – 13 September at the IDC Conference Centre in Sandton.

Taking part in this plenary session will be Transnet Acting Group CEO Mohammed Mohamedy, Eskom Corporate Specialist for Finance and Economic Regulation Deon Joubert, EE Publishers Managing Director Chris Yelland and Energy Advisor Ted Blom.

Now in its fifth year, the Indaba is organized and hosted by SEIFSA. Its core objective is to provide a platform for policy makers, labour representatives and businesses operating in the metals, engineering and related sectors to discuss the challenges facing the sector and collectively to devise sustainable solutions aimed at ensuring its sustainability.

The Indaba will also deliberate on the following topics:

  • The new Automotive Production and Development Programme: Will the Metals and Engineering Sector Benefit?
  • A Growing Chinese Presence in South Africa: How Should Local Business Respond?
  • The Fourth Industrial Revolution and Manufacturing: Is South Africa Ready – Or Will It Be Left Behind?
  • The new Automotive Production and Development Programme: Will the Metals and Engineering Sector Benefit?
  • The Industrial Policy Action Plan and the National Development Plan: A Progress Report on Their Implementation

The line-up of speakers expected to address delegates includes:

  • Pravin Gordhan, Minister of Public Enterprises;
  • Ebrahim Patel, Minister of Trade, Industry and Competition;
  • Patrick Bond, Professor at the Wits School of Business;
  • Dr Thulani Dlamini, CEO of the Council for Scientific and Industrial Research;
  • Ayanda Mngadi, Chairperson of the Manufacturing Circle; and
  • Ms Busi Mabuza, Chairperson of the South African Chapter of the BRICS Business Council.

The agenda for the 2019 Indaba is driven by the state in which the metals and engineering sector currently finds itself.


Issued by:
Ollie Madlala
Communications Manager
Tel: (011) 298 9411 / 082 602 1725

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