Johannesburg, 10 March 2022: Production in the metals and engineering sector started the year on a relatively strong note. On a year-on-year basis, production in the total sector expanded by 1.2% in January 2022. On a month-on-month basis between December 2021 and January 2022, production in the sector expanded 4.7%. Total sales increased by 6.2% between these two months from R67.4 billion to R71.6 billion, notes SEIFSA’s Chief Operating Officer, Tafadzwa Chibanguza.
Increases were noted in the electrical machinery products (14%), rubber products (12%) and basic iron and steel (11%). On the contrary, production decreases experienced in in the vehicle parts and accessories (-12%), household appliances (-9%), and structural metal products (-6%).
This is also on the back of the 2.9% year-on-year production growth recorded for the total manufacturing sector in January 2022. Between December 2021 and January 2022, total manufacturing production expanded by 1.9%. The metals and engineering sector, made up of 13 sub-sectors, constitutes 30.9% of the total manufacturing sector. It is encouraging to note that at an aggregate level, production levels in the metals and engineering sector reached pre-covid-19 levels by December 2021.
Chibanguza said “The positive production data recorded in January 2022 is very much in line with the other data points released in the last few days, namely the Purchasing Managers Index and the Business Confidence Index, which all showed notable improvement. This confirms the fact that from the last quarter of 2021 into the first few months of 2022, global economic recovery was starting to take shape and generally supportive of domestic growth in various sectors. However, the geo-political developments involving Russia and Ukraine present downside risks for this recovery”
Risks include heightened uncertainty, volatility and inflationary risks that will manifest through food and the commodities complex including oil prices. This will likely to force the South African Reserve Bank to act much sooner and more aggressively than originally anticipated hurting the prospects of the recovery. Domestically, the recent bouts of load shedding will also dampen the outlook of the productive sectors.
While South Africa cannot do too much about the global geo-political landscape and the risks that will manifest from the developments in that arena, resolving domestic challenges, through implementing urgent reform in the electricity supply industry is entirely in the country’s control. Hence, SEIFSA will continue to press for the necessary reforms to safeguard productive capacity in order to stimulate much-needed growth, Chibanguza concluded.