Johannesburg, 3 September 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the news that the South African economy avoided a technical recession during the second quarter of 2019.
Speaking after the release of the Gross Domestic Product (GDP) numbers by Statistics South Africa today, SEIFSA Economist Marique Kruger said the improvement in the data is encouraging, especially given the need for improved business activity to ensure that companies thrive.
The Stats SA data indicated that South Africa’s real GDP increased to 3.1 percent during the second quarter of 2019, from a revised seasonally-adjusted -3.1 percent
quarter-on-quarter decrease recorded in the first quarter of 2019.
Encouragingly, the broader manufacturing sector, including its heterogenous Metals and Engineering (M&E) cluster of industries, was amongst the positive contributors to GDP growth in the second quarter, increasing to 2.1 percent and contributing 0.3 of a percentage point in the second-quarter GDP growth.
“Given that manufacturing is amongst the sectors which contributed positively to the increase in second-quarter GDP growth, continuous support for the broader manufacturing sector is crucial. Support is also needed for the mining sector, which is a key driver of the M&E sector demand, given its robust growth of 14.4 percent,” Ms Kruger said.
She added that given the continuous headwinds faced by manufacturers amid increasing operational and intermediate input costs underpinned by high logistics and energy costs, the uptick in domestic growth is encouraging to businesses in the sector. This is because the slow economic growth environment makes it increasingly difficult for companies in the M&E sector and in the broader domestic economy to plan business activities accurately in the short to medium term.
While the improvement in growth is a step in the right direction, Ms Kruger cautioned that the challenges faced by businesses are likely to prevail, given low-capacity utilisation and the recent dip in the PMI.
“There is still a lot of work that needs to be done to sustainably revive the pedestrian domestic economy and to support industrial growth and expansion. More attention should also be paid to the reconfiguration of key State-owned enterprises, which are important drivers of growth for businesses and investment.”
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