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Press Release – 2015/11/11: METALS AND ENGINEERING SECTOR CONTINUES TO CONTRACT

By 11th Nov 2015Sep 20th, 2019No Comments

SEIFSA Chief Economist Henk Langenhoven said that any signs of a levelling off were keenly awaited. The fact that monthly production in September was 3,5% higher than in August 2015 was a sign of hope, which resulted in third-quarter production being 0,23% higher than in the second quarter and nearly 1% higher than in the third quarter of 2014.

“The instability in these numbers is mainly due to the 2014 base effect of the strikes.

If these are signs of a levelling off, it does not mean a lower turning point has been reached.

The forward-looking confidence indicators are still pointing downwards, and any real recovery might have been postponed to the second half of 2016,” Mr Langenhoven said.

Wild fluctuations in performance among the different sub-industries were very evident:

  • All sub-industries had positive growth when September 2015 is compared with August 2015, except rubber products (-8,6%) and general machinery (-5%)resulting in the overall year-on-year growth of 3,5%.
  • The reverse was almost true when September 2015 is compared with the same month in 2014; all sub-industries recorded declines, except electrical equipment and machinery (+9,6%), household appliances (+8,6%), structural metals (+7,5%) and special machinery (+2,4%), which resulted in an overall decline (-3,3%).
  • The latter was true when nine months of 2015 and the last 12 months (ending in September 2015) were compared with the previous periods, resulting in the 2% decline mentioned above.

Mr Langenhoven said that recently a lot of attention has been focussed on important sectors which are demand drivers for metals and engineering sector products. This boded well for the sector over the medium to longer term.

Although exports were not performing well owing to the worldwide commodities slump, great practical efforts were being made to secure the African Growth and Opportunity Act access to the United States markets. This would support the auto exports and, indirectly, the metals and engineering sector.

Mr Langenhoven was also optimistic that the Mining Phakisa process also had the potential to distil real and effective plans to set the mining sector on a course for growth.

“As recently as this week, the Department of Trade and Industry (Dti) announced an adjusted and more favourable dispensation around accessibility for investors to the automotive production and development programme incentives. This also bodes well for the M&E sector,” he said.

Mr Langenhoven said that although a lot of attention had been given to the metals and engineering sector by the Ministry of Trade and Industry, the latest policy signals had been confusing: on the one hand the Ministry had declared the sector distressed, but President Jacob Zuma’s Nine-Point Plan had declared it a potential growth focus.

Additionally, while the Ministry has suspended applications for Manufacturing Competitiveness Enhancement Programme access, it has also allocated R300 million more from its normal budget for the sector.

“There is, therefore, a need to formulate a consolidated and creditable policy stance for the sector. In the meantime, the actual, short-term data for metals and engineering, read in conjunction with the lack of confidence reflected by several indicators, mean that a lower turning point is not in sight yet,” Mr Langenhoven said.

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