JOHANNESBURG, 4 NOVEMBER 2021 – Despite the country’s continued lockdown, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes gains in capacity utilization in the manufacturing sector.
Data released by Statistics South Africa today shows total capacity utilisation was 78.0% in the third quarter of 2021 compared with 71.7% in third quarter of 2020, this represents an increase of 6.3%. Within the Metals and Engineering (M&E) sector, capacity utilisation improved to 74.9% in the third quarter of 2021, from 66.1% in third quarter of 2020. Nine of the ten manufacturing divisions showed increases in utilisation of production capacity in August 2021 compared with August 2020. “This is positive news as it demonstrates that if lockdown regulations are relaxed along with increased vaccine roll-out, production levels can increase further under improved demand conditions,” according to SEIFSA Economist Palesa Molise.
The manufacturing sector has also shown signs of improvement in terms of production patterns with year-to-date production improvement of 11.6 % to the month of August 2021. Despite the recent lootings and on-going interruptions in electricity supply South Africa’s economy recorded its fourth consecutive quarter of growth, rising by 1.2% in the second quarter of 2021 with the Absa Manufacturing PMI moving into an expansionary trajectory of above 50. “Although there are improvements in total capacity utilisation, we are still operating at a level lower than 80% benchmark” warned Molise.
The M&E sector is heavily reliant on demand from key Government infrastructure projects to boost its production and sales, especially for products such as steel and other related downstream products such as roofing material. Hence increased level of industrial domestic demand is required for manufacturers to reboot capacity utilization levels to above 80%,” Molise says.
It is therefore imperative that the roll-out of Covid-19 pandemic vaccines is accelerated and all direct and indirect disruptions to production cycles are kept to an absolute minimum if we are to see confidence returning to our industrial production base.