Press Release – 2014/10/10:METALS AND ENGINEERING SECTOR BEGINNING TO SHOW SIGNS OF RECOVERY

Metals and engineering sector production grew by 16% in August after a month-long industrial action and losses of 17% in July.

However, SEIFSA Chief Economist Henk Langenhoven cautioned that the recovery was not uniform with electrical machinery and equipment, which resurged by 30%, with the least recovery in special machinery production (7%).

Mr Langenhoven said the magnitude of the challenges facing the sector was borne out by the following facts;

  • Despite the significant recovery of production in August, when compared to August 2013, the sector still contracted by nearly 4%.
  • Production for the year to date was 3,5% lower than the same period last year.
  • The recovery was also not enough to change the course of the year; and
  • When compared to production for the same 12-month period ending in August last year, there was a contraction of nearly 2% in the 12 months ending in August this year.

“The industrial unrest was the last thing the sector needed. Further under-utilisation of production capacity and more strain on profit margins have been the result. The short- term consequences of these numbers are company closures and job losses,” Mr Langenhoven said.

He added that there were more serious longer-term consequences.

“The fragility of the inter-relationship between metals and engineering industries and the auto sector and the real possibility of losing out on supply chains to the latter is significantly illustrated by the August growth numbers. Whereas motor vehicle production recovered by 32% in August, the production of vehicle bodies and trailers recovered by only 5%,” said Mr Langenhoven.

Even more concerning was the fact that the production of parts and accessories did not recover at all.

“We hope sincerely that these facts will be sobering enough to force new thinking and leadership from all stakeholders so that we all work cooperatively together in the search for remedies,” Mr Langenhoven concluded.

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