was successfully added to your cart.
SEIFSA

Management

By | SEIFSA News | No Comments

Nuraan Alli

Sales  and Communications Manager 

011 298 9436
011 298 9536 (Fax)
nuraan@seifsa.co.za

Khanya Vilakazi
Human Capital and Skills Development Manager

011 298 9425
011 298 9525 (Fax)
khanya@seifsa.co.za

Michael Lavender
Industrial Relations Manager

011 298 9415
011 298 9515 (Fax)
michaell@seifsa.co.za

Mariaan de Jager
Finance Manager

011 298 9431
011 298 9531 (Fax)
mariaan@seifsa.co.za

Theresa Crowley
Associations Manager

011 298 9419
011 298 9519 (Fax)
melanie@seifsa.co.za

Desmond Uithaler
Operations Manager

011 422 2500
011 422 2503 (Fax)
desmond.uithaler@gijima.com

SEIFSA

Legal Services Retainer Package

By | SEIFSA News | No Comments

SEIFSA Legal now offers a retainer package that ensures our clients are well armed to minimise risk and conflict that can lead to litigation, or worse. Our objective is to become an integral part of our clients’ teams, which is essential to your strategic success.

 

How does a retainer package benefit my company/organisation?

  • It is a pro-active approach, therefore exposure to unnecessary legal fees is avoided
  • It allows the company to more accurately budget for legal expenses
  • It helps lessen the amount of legal fees by paying on a monthly basis instead of paying for legal assistance on an hourly basis
  • The peace of mind of knowing we are only a phone call away

The retainer includes 12 hours per month for 12 months or 5 hours per month for 6 months.

 

Services include:

  • Chairing disciplinary hearings
  • Unlimited legal advice
  • Preparation for arbitrations
  • Drafting of contracts
  • Interlocutory applications before the CCMA and MEIBC
  • Discounted rates for Legal representation

 

Standard Retainer:

  • The standard retainer agreement is available to clients at a fee of R8 000.00 per month for 6 months
  • and R6 500.00 per month for a 12 month agreement.

 

Special offer:

If you sign up for the 12 months retainer package before the 31 January 2016, your organisation will enjoy all the services of the standard retainer PLUS the following:

  • 1x Labour court litigation (action or application proceedings)
  • Unlimited representation at the MEIBC (For the duration of your retainer)
  • 50% discount on all unsettled disputes

If you sign up for the 6 months retainer package before the above stipulated date, you pay R1 000.00 less per month i.e. ONLY R7000.00 per month.

 

For more information, please contact:

[grid][column one-third]

Bridgette Mokoetle
Legal Executive & Company Secretary
Direct: 011 298 9413
E-mail: bridgette@seifsa.co.za

[/column][column one-third]

Thandi Malele
Legal Officer
Direct: 011 298 9452
E-mail: thandi@seifsa.co.za  

[/column][column one-third] [/column][/grid]
SEIFSA

FAQ

By | SEIFSA News | No Comments

Human Capital & Skills Development FAQ

We are a small company, our total leviable amount paid to all employees during a 12 month period does not exceed R500 000.00. In our 11 years of existence it never has and probably never will exceed. Do we still have to register and pay the Skills Development Levy (SDL)?

View Human Capital & Skills Development FAQs


Safety, Health, Environment & Quality FAQ

Why do employers have to comply with the OHS Act?

View Safety, Health, Environment & Quality FAQs


Industrial Relations FAQ

We have employees working from 06h00 on weekends. Their normal tea time is from 10h00 to 10h30 and lunch time is from 13h00 to 13h30. Some of the employees take additional breaks from 18h00 to 18h30 and then go home at 19h00. I know that according to the Basic Conditions of Employment Act they are entitled to a half-hour break for every five hours worked, but what does the Main Agreement say on this?


Economic & Commercial FAQ

What is the best indices to monitor price increase in the food /catering industry?

Marketing Manager

By | SEIFSA News | No Comments

The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) seeks to appoint an experienced Marketing Manager with a solid track record of product and corporate marketing success. Based at SEIFSA’s Johannesburg Head Office, the Marketing Manager is responsible for marketing the Federation and its activities and creating a climate conducive for the successful sale of its products and services.

Reporting to the Chief Executive Officer, the successful candidate will be a hard-working, conscientious person with good communications skills and admirable people skills who will work very closely with the Sales Manager and co-operatively with all Divisional Executives, Managers and other members of staff.

In addition to managing the SEIFSA brand, the Marketing Manager will be responsible primarily for the marketing of SEIFSA’s products and services, management of corporate initiatives like the Southern African Metals and Engineering Indaba, the SEIFSA Awards for Excellence and the annual SEIFSA Golf Day, as well as the sourcing/generation of sufficient sponsorship for these initiatives.

A dependable, pro-active person who delivers solid results and leads by example, the Marketing Manager will be an out-going person of unimpeachable integrity and a dependable team player. S/he will be sufficiently creative to ensure that the Federation and its products and services are promoted effectively without the benefit of a marketing budget and will personally take on the responsibilities that go with the role. S/he will:

  • Hold at least a Bachelor’s degree with Marketing as a major and be a reliable team player who leads by example and gets along with all colleagues;
  • Have co-responsibility for the performance of SEIFSA’s products and services and the Federation’s financial performance;
  • Have overall responsibility for the financial performance of SEIFSA’s Economics and Commercial Division, including the Small Business Hub within that Division, and for the financial performance of the SEIFSA Training Centre;
  • Work closely with Divisional Executives who will be her/his primary internal customers and  ensure that all of SEIFSA’s public training sessions are promoted widely at least six weeks in advance;
  • Have overall responsibility for the successful performance of the annual Southern African Metals and Engineering Indaba, the SEIFSA Awards for Excellence and the SEIFSA Golf Day, for which s/he will source enough sponsorship to ensure that these events generate a profit per annum;
  • Have a hands-on approach, be results orientated and driven by a need to  achieve;
  • Fully subscribe to and live SEIFSA’s Corporate Values (Integrity, Diversity, Excellence, Stewardship, Passion, Innovation).

A transformed organisation, SEIFSA is committed to excellence and professionalism and will appoint the best possible candidate for the job.

To apply, please contact Melanie Mulholland, SEIFSA Human Capital and Skills Development Executive on 011 298 9400 or email her on Melanie@seifsa.co.za 

Vacancies

By | SEIFSA News | No Comments

 

Join a dynamic workplace

At SEIFSA, we offer competitive remuneration, enhanced by subsidised benefits such as medical aid and pension contributions. Our work environment is highly professional, with a company culture that allows individuals the opportunity to continuously develop and enhance their personal growth, training and development, while upholding SEIFSA values.

SEIFSA employees are in control over how they do their work and are incentivised to meet agreed targets. Each employee is challenged and finds meaning from her/his contributions by continuously being able to add value in what s/he does. We also identify, honour and recognise employees. 

Jobs available

No jobs are available.

sample

By | SEIFSA News | No Comments

Topics

International Economic and Steel Environment

The world economy is growing slower than expected, markets for the sector’s exports have also grown slower and commodity prices are lower. Export earnings in dollar terms are down, but declining oil prices are positive for lower inflation.

South Africa is struggling with a balance of payments deficit and the metals and engineering sector contributes substantially to that deficit because of its own imports, but also imports replacing domestically-manufactured goods. It struggles to compete internationally owing to cost pressures and production disruptions (labour and electricity), despite a steadily-depreciating currency.

The latest Organisation for Economic Cooperation and Development (OECD) and International Monetary Fund (IMF) economic prospects concluded that global economic recovery will remain sluggish, with moderate recovery in the UK and the US. The Chinese economy is also steadily slowing down.
The slowdown in emerging economies and risks to their outlook seem to be centred on a few characteristics. World Bank studies since 2013 have confirmed this view:

  • The Chinese and Indian economies are huge markets for commodity-rich countries; any slowdown in growth in those markets hurts global exports (South Africa’s included). Slow economic growth in Africa means lower exports from SA to the continent, which makes about 20% of South Africa’s export market, as a second-round effect.
  • The huge oil price declines have put oil exporters’ growth prospects in jeopardy. This is particularly so in Africa. Although the lower price of crude oil has a positive impact on SA’s trade balance and inflation, lower African growth means lower exports.
  • Commodity and metal price declines will also harm SA and African exports, mining expansions and demand for M&E products.
  • Accommodative actions by central banks in the developed world, with the exception of the USA, cushioned continued capital market and exchange rate disruptions in emerging markets during 2014. However, the potential impact of further monetary policy tightening in the US, through strengthening of the dollar, has been compared to a wrecking ball that could play havoc with capital flight out of countries with large external and budgetary deficits.

The SA Reserve Bank has called the prospects “decidedly uncomfortable” and warned about the impact of labour market instability – and now electricity constraints – on SA production and the exports, particularly in mining, the auto manufacturing and M&E sectors.

There is more uncertainty about current and prospective GDP growth rates for the world economy than a year ago. Although demand for the sector’s products has recovered since the financial crisis in 2008, demand growth has levelled off in unison with overall world economic growth. SA seems to have lost substantial ground in international markets during the upheaval in the aftermath of the crisis and has not been able to regain market share.

Domestic Economic and Steel Environment

The South African market represents on average about 40% of total production/sales of the M&E sector. The value of this market in 2014 is estimated to have been in the order of R190 billion. The domestic market for the metals and engineering sector depends largely on intermediate products supplied to mining (10%), construction (10%), machinery and equipment manufacturers (45%) and the auto sector (8%). Of the R190 billion SA market supplied by domestic companies, 90% were intermediary products or gross fixed capital formation in the SA economy.

The South African economic growth for 2014 is estimated to have been around 1,4%. Overall gross fixed capital formation (GFCF) is expected to have grown by 3,3% during 2014. The outlook for economic growth in 2015 is around 2,5% (if not lower, depending on the electricity situation) and investment more or less the same as 2014. Expectations are that both will improve further in 2016.

Of more direct interest to the metals and engineering sector is the outlook for infrastructure expenditure (a recent report by Nedbank showed that announced projects halved since 2013), mining sector investment prospects (which have not fully recovered after the strikes last year and are hampered by low commodity prices) and the performance of the auto manufacturing sector (with mixed prospects). Imports remain a large part of supply to the SA economy.

The Position of the Metals & Engineering Sector 

Last year (2014) was disappointing, despite the fact that a better performance was expected, when compared to 2013, because of prospects for domestic and international economic recovery at the beginning of the year. Neither materialised fully and the month-long M&E strike (on top of the five-month mining sector disruptions) weighed heavily on the sector. It is estimated to have contracted by nearly 2%, producing R488 billion or R117 billion of value add during 2014. This means that its production levels are still between 25% and 30% below the peak during 2007. Employment declined, capacity utilisation remained below optimum and profitability declined.

Without demand – or the prospects of growth in demand – and idle production capacity, profits do not materialise and no investments take place. This seemed to have been the M&E conundrum at the beginning of 2015.

The Policy Environment

There has been an overload of mixed and negative signals around the country’s development challenges. Of late, the National Development Plan and the elaboration of action plans in the Medium-Term Strategic Framework have become rallying points that promise more harmony. This is to be welcomed, although the “execution deficit” or perceived deficit remains a stumbling block.

“Uncertainty” has been rising since 2005 (high growth phase and ASGISA), and since then neither elections nor new blueprints led to any significant improvement. This is an ominous sign and calls for renewed efforts to rebuild confidence. The concern is that, if not arrested, the inner contradictions and ambiguity in policy may become destructive.

Any policy response must recognise the complexity of the sector and the fact that it is highly exposed to international markets and import competition. The sector has the same domestic constraints as all other sectors, but it seems to be losing its competitiveness. The support for higher value-added products internationally seems to be overwhelming SA producers. The strategy to tax upstream (commodity and basic metal) producers to compensate for international subsidies of imported products lower down the production pipeline is not viable. The former are competitive and earning foreign exchange, while the latter are not.

The metals and engineering sector has experienced slow and unstable growth since the financial crisis in 2007. The recent demand and production disruptions through various strikes have exacerbated already alarming trends, resulting in the sector contracting during 2014.

Industrial policy is caught between threats (international competition) and constraints (domestic infrastructure and logistics). These constraints are often under-estimated as physical restrictions on business. Without secure electricity supply, production cannot expand. Therefore, the impact of policies often has the effect of compensating for these constraints, instead of stimulating performance in the sector.

 

2015 and Prospects for 2016

The domestic economy is expected to grow by less than 2,5% during 2015 and closer to 3% in 2016. Fixed investment is expected to grow just over 3% in 2015 and by 4% in 2016.

The SARB leading indicator has been moving sideways for some time, which is in line with previous expansion periods. The Bureau for Economic Research (BER) general confidence index shows the same patterns, also for quite a few quarters. Both of these indicate slow growth for the future, which could be exacerbated by further policy uncertainty, labour unrest and the electricity constraint.

The two general manufacturing confidence indicators show ambivalence. Actual and expected manufacturing confidence showed declines. The business activity sub-index show growth in the fourth quarter of 2014, but the December number declined strongly, indicating the first signs of the impact of the electricity constraints on the M&E sector.

Prospects for international market growth depend a lot on economic recovery in Asia (40%), EU (35%) and Africa (22%) and North America (14%) of the market. Purchasing managers’ index indicators for all these regions, except the US and the UK, have been moving sideways or declined recently. Only the US growth performance seems to be sustainable, although Asian (Chinese) growth out-performs the rest, but at a slower pace than in the past.

Not surprisingly, growth in the demand for steel and related products has been moderating recently and is expected to be about 2%, with much lower prices and heavily-contested markets.
Imports of final and intermediary products have been crowding out domestic suppliers. Domestic manufacturers in the M&E sector are also more inclined to buy components from importers, thus decreasing domestic production.

International Trade dynamics

 

The sector recorded an overall improvement in its trade balance with the rest of the world in 2014. It meant that the sector’s trade deficit with the rest of the world shrunk.
This net result was achieved with the depreciating rand acting as shock absorber, countering falling export prices in dollar terms (in sympathy with the depressed commodity price cycle) and sluggish international demand.

Imports became more expensive (in rand terms), caused by the exchange rate depreciation. However, imported products became cheaper (in dollar terms), also due to lower international commodity prices. The price effect (higher rand cost for imports) and lower import volume demand within SA (due to sluggish growth) had the net result of imports not growing as much as they did in the years preceding 2014.

Africa continued to be a strong export market for the metals and engineering sector during 2014, particularly Southern African Development Community and West Africa. However, Africa’s growth is likely to slow down due to continued sluggish commodity demand internationally, significantly lower oil revenues and the drastic curtailment of investment in new ventures by companies and probably governments.

Despite some respite in terms of the trade balances not deteriorating as much as before, the sector as a whole is still overwhelmed by imports, primarily from Eastern Asia and Europe. Generally this is due to low international competitiveness, which cannot be solved by a continually-depreciating exchange rate. The more complex production becomes and the greater the share of domestic input cost (labour, electricity, transport, etc.), the less competitive the industries become. This is reflected in the sector’s long-term trade balance trend.

The medium- to longer-term impact of instability of domestic production (industrial relations, electricity etc.) disruptions and, therefore, security of supply to international customers has not been discounted yet and should be of added concern for the future.

Electricity constraint and its impact on South Africa’s economic growth

There is very little doubt that reliable energy supply is of vital importance to the growth of any country’s economy. Unstable electricity supply brings business operations to a standstill and hampers long-term economic growth.

South Africa has, over the years, experienced frequent energy supply shortages. In addition, uncertainty about the security of its supply going forward as well as constant reports of delays in solving supply challenges are bound not only to impact negatively on South Africa’s already ailing economy, but also to change how the country is perceived as an investment destination.

On average, energy costs in the metals and engineering sector account for about 8% of intermediary input costs. It, therefore, stands to reason that, without reliable energy supply, the sector cannot grow. It is very unfortunate that even right now the sector cannot operate at full capacity as a result, among other things, of energy constraints.

Actual or realized economic growth in the South African economy has fallen substantially below its potential. While energy provision should support our growth ambitions, there appears to be a real danger of the two gradually drifting apart.

South Africa is now seriously in danger of falling below a 2,5% average in this decade. This is mostly owing to the fact that although the economy had grown faster in the past decade (2000/2010) than recorded during the seventies, South Africa missed the last super cycle and completely under-estimated the economy’s accelerated energy demand over this period.

As a country, we need to tackle this challenge with a single-minded determination as though we were going to war. Without a sufficient and secure supply of energy – and, in this case, electricity – it is not possible for South Africa to be globally competitive.

 
 
 
kn

Looking for a Speaker

By | SEIFSA News | No Comments

kn
Kaizer Nyatsumba 
Chief Executive Officer at SEIFSA

The Impact of  Government actions and  Policies On The Economic Environment

It goes without saying that Governments’ actions and or policies can have a major influence on a country’s economic environment. The stability of a country’s political landscape can affect the appeal of that particular country’s markets. An unstable political environment can crowd out potential investors while a stable political environment can attract direct foreign investment. Government’s policies can also either stimulate or hamper a country’s economic growth.

The recent imposition of a 10% tariff on imported steel following an appeal to Government by South African steel manufacturers to put in place protection measures aimed at saving South Africa’s ailing steel sector and employment in that sector is but one of the many examples that an impact of Government’s actions can have on the business environment.
Whether through an increase or decrease in company taxes, an introduction of a bill, or tariffs and trade control, Governments’ actions or policies can affect the economic environment. It is, therefore, of paramount importance that business keep track of the political environments of countries in which they do business.

Government and the Economy: Should Government’s Economic Involvement Be Limited to Regulation?

This is a highly contested debate. There are those who take a classic economic view and believe that social well-being is maximized by minimizing Government’s involvement in the economy. This school of thought is of the view that Government’s involvement should, infact, be limited to ensuring good government, maintaining law and order, and the defence of free societies.

On the other hand, there are those who believe in the Keynes school of thought that justifies Government’s intervention through public policies that aim to achieve full employment and price stability. They believe that Government can use its financial strength to acquire goods and services, while at the same time improving the health, welfare, and security of its population, while communists and to a certain extent socialists believe in an even stronger role for Government and government ownership of the means of production and distribution.

The reality in South Africa and in many other countries in the world is that no economy can function without any sort of intervention from the State. But in a developing country such as South Africa where unemployment is rife, should Government’s role be limited to mere regulation or should Government play a more active role that entails contributing towards employment creation. 

GOVERNMENT AND THE ECONOMY: SHOULD GOVERNMENT’S ECONOMIC INVOLVEMENT BE LIMITED TO REGULATION?

This is a highly contested debate. There are those who take a classic economic view and believe that social well-being is maximized by minimizing Government’s involvement in the economy. This school of thought is of the view that Government’s involvement should, infact, be limited to ensuring good government, maintaining law and order, and the defence of free societies. 

On the other hand, there are those who believe in the Keynes school of thought that justifies Government’s intervention through public policies that aim to achieve full employment and price stability. They believe that Government can use its financial strength to acquire goods and services, while at the same time improving the health, welfare, and security of its population, while communists and to a certain extent socialists believe in an even stronger role for Government and government ownership of the means of production and distribution. 

The reality in South Africa and in many other countries in the world is that no economy can function without any sort of intervention from the State. But in a developing country such as South Africa where unemployment is rife, should Government’s role be limited to mere regulation or should Government play a more active role that entails contributing towards employment creation.

The Importance of Forging Stronger Relations Between Government and Business

There is very little doubt that Government and business need to resuscitate meaningful and regular engagements in order for the South African economy to grow and reach its full potential. It is critically important that the ruling party have robust and constructive discussions with the entire South African business community

It is, infact, only when the Government recognises the business community for the partner that it is, and works closely with it, that South Africa will realise its true economic potential. The ruling party needs to accept that a stagnating economy is not in anybody’s interest: not the Government’s, not business’s, not labour’s and certainly not the poor’s. Instead, South Africa needs a growing economy in order to ensure that more jobs are created, more people are employed and more taxes, both corporate and personal, are paid to the national fiscus.

.

Entrepreneurship: Are Entrepreneurs Born or Made

Entrepreneurs are a backbone of any country’s long-term economic growth. In South Africa entrepreneurs were responsible for creating an estimated 2.8 million small businesses that made up the SMME sector in 2012. This sector, in turn, contributed between 52% and 57% to South Africa’s Gross Domestic Product. During that period SMMEs also provided about 61% of the country’s employment.

History shows that economic progress has been significantly advanced by pragmatic people who are entrepreneurial and innovative, able to exploit opportunities and willing to take risks. For example, it is reported that the United States of America realises more than half of its economic growth from industries that were not in existence a decade ago. This is directly attributable to innovative entrepreneurs and their start-up businesses.

It, therefore, goes without saying that the vital importance and positive contribution of entrepreneurship and an entrepreneurial culture in economic and social development cannot be overstated.
Entrepreneurs not only create and bring to life new technologies, products and services but also contribute significantly towards employment creation. In a developing country such as South Africa where unemployment levels are at all-time highs, entrepreneurship should not only be preached but every effort should be made to create a conducive environment for entrepreneurship.

But are entrepreneurs Born or Made? While some will argue that entrepreneurs are a special breed, born with a drive to succeed that most people lack, others are adamant that entrepreneurs can be created through education, experience and mentorship – whether born or made, there is no doubt that entrepreneurs have a pivotal role in economic development and every effort must be made to ensure that entrepreneurs thrive. 

Competitiveness and Intra-African Trade Critical in Realizing Africa’s Growth Potential

Intra-African trade is critical in realizing Africa’s growth potential. Turbulent economic conditions that the world is currently experiencing make it even more necessary for African countries to trade with one another in order to boost economic growth, create employment and ultimately eradicate prevalent poverty in the continent. Africa is the last frontier for growth owing to its rich mineral resources. This is evident in the number of international companies conducting exploration and mining activities in the African continent. Mining activities create opportunities in other economic sectors such as retail and manufacturing. Therefore, it is of critical importance that African countries create and enhance opportunities for intra-African trade.

Although intra-African trade has increased over the years, a lot still need to be done to improve in this regard. According to various research findings, exports by African countries to their peers on the continent have surged by 32% since the 2008 economic downturn, compared to growth of just 5% in exports to the rest of the world. Nevertheless, in 2011 intra-African trade accounted for merely 9% of the continent’s total trade with the world, compared to 25% for Latin America and almost 50% for Asia.

Infrastructure, red tape and boarder frictions are but some of the serious challenges currently halting intra-African trade from thriving. These challenges need to be addressed and ultimately eradicated in order for trade among African countries to thrive.

To benefit from Intra-African trade, however, South Africa needs to be internationally-competitive. South Africa needs to modernize production capacity and stabilize the labour market, among other things, for it to be more internationally competitive.

The African market is very highly-competitive. This is due to the fact that the rest of the world is experiencing stagnation as far as economic growth is concerned. For us to benefit from the rising African demand, we need to make sure that we are internationally-competitive by using new technologies to do more with the capacity that we have and to reduce production costs by, among other things, stabilizing our expensive labour market.

Socio-economic ills: Does Business Have a Bigger Role to Play?

It goes without saying that the lack of education is one of the main contributing factors to South Africa’s socio-economic ills such as unemployment, crime and poverty, among others. It also goes without saying that education has a crucial role to play in providing sustainable solutions to the socio-economic ills that South Africa currently faces. 

However, education, especially university education is beyond the means of most South African households. The recent spate of protests, for fees to fall, by university students across the country raise very crucial issues and should be a cause for concern not only for Government and institutions of higher learning but for the private sector as well.

Does business have a role to play in addressing the socio-economic ills of communities within which they operate and to what extent should their involvement be?

Within the South African context, the imperative for corporate social investment (CSI) arose from the inclusion of socio-economic development as an element of the broad-based black economic empowerment scorecard. CSI has become a formal and recognised part of corporate South Africa.

The formalising of CSI, however, has not resulted in universal acceptance of the value it offers. For many companies, CSI remains on the periphery, a nominal expenditure of 1% of company profit. For others, CSI is an important part of the business, providing long-term solutions to the socio-economic ills of South Africa, and an effective vehicle to uplift surrounding communities.

But should the addressing of social ills that contribute to the slow growth of the South African economy be solely left to Government or should the private sector play a more active role in ensuring the well-being of the people who live in communities in which they operate?

About Mr Nyatsumba

Mr Nyatsumba is currently the Chief Executive Officer at SEIFSA. A Certified Director (IoDSA), Mr Nyatsumba holds an MBA from the University of Hull, a BA Honours degree from Georgetown University in Washington DC, a Post-Graduate Certificate in Economics from the University of the Witwatersrand, an Advanced Management Diploma from the University of Pretoria’s Gordon’s Institute of Business Science, a Leadership Development Diploma from the Harvard Business School and a Diploma in Journalism from the Newspaper Institute of America.

A regular commentator on issues pertaining to the South African economy and political landscape, Mr Nyatsumba’s comments and thought leadership articles have been published in most of South Africa’s major publications including Business Day, Business Report, Financial Mail, Finweek and The Sunday Times. His comments have also featured on international newswires such as Bloomberg and Reuters, among others.

In addition, Mr Nyatsumba has been featured as guest commentator in international as well as local television networks including BBC, SABC, ENCA, CNBC Africa and has been heard on SAFM, Power FM, Talk Radio 702 and Classic FM, among other radio stations.

Mr Nyatsumba has held numerous senior leadership and executive positions in different sectors of the economy in South Africa and the United Kingdom. These include Managing Director of KMN Consulting, Vice-President: Corporate Affairs and Shared Services at PetroSA, Group General Manager: Corporate Affairs, Marketing and BEE at Sasol Limited, Public Affairs and Communications Director at Coca-Cola South Africa, as well as Head: Corporate Marketing and Vice-President: Corporate Affairs at Anglo American South Africa.

An author and previously a journalist, Mr Nyatsumba has also worked as Political Editor and Executive Editor of The Star, Deputy Editor of The Mercury, founding Editor of The Independent on Saturday, Editor of the Daily News and Associate Editor of The Independent in London.

He has served on the Boards of the 2010 (World Cup) Big Company, the Anglo American Chairman’s Fund, the Anglo American Medical Aid Scheme, Business Against Crime, National Business Initiative, Tourism Business Council of South Africa and on the Council of the University of Zululand.


 

 

 Henk 1 web
Henk Langenhoven
Chief Economist

 

International Economic and Steel Environment

The world economy is growing slower than expected, markets for the sector’s exports have also grown slower and commodity prices are lower. Export earnings in dollar terms are down, but declining oil prices are positive for lower inflation.

South Africa is struggling with a balance of payments deficit and the metals and engineering sector contributes substantially to that deficit because of its own imports, but also imports replacing domestically-manufactured goods. It struggles to compete internationally owing to cost pressures and production disruptions (labour and electricity), despite a steadily-depreciating currency.

The latest Organisation for Economic Cooperation and Development (OECD) and International Monetary Fund (IMF) economic prospects concluded that global economic recovery will remain sluggish, with moderate recovery in the UK and the US. The Chinese economy is also steadily slowing down.
The slowdown in emerging economies and risks to their outlook seem to be centred on a few characteristics. World Bank studies since 2013 have confirmed this view:

  • The Chinese and Indian economies are huge markets for commodity-rich countries; any slowdown in growth in those markets hurts global exports (South Africa’s included). Slow economic growth in Africa means lower exports from SA to the continent, which makes about 20% of South Africa’s export market, as a second-round effect.
  • The huge oil price declines have put oil exporters’ growth prospects in jeopardy. This is particularly so in Africa. Although the lower price of crude oil has a positive impact on SA’s trade balance and inflation, lower African growth means lower exports.
  • Commodity and metal price declines will also harm SA and African exports, mining expansions and demand for M&E products.
  • Accommodative actions by central banks in the developed world, with the exception of the USA, cushioned continued capital market and exchange rate disruptions in emerging markets during 2014. However, the potential impact of further monetary policy tightening in the US, through strengthening of the dollar, has been compared to a wrecking ball that could play havoc with capital flight out of countries with large external and budgetary deficits.

The SA Reserve Bank has called the prospects “decidedly uncomfortable” and warned about the impact of labour market instability – and now electricity constraints – on SA production and the exports, particularly in mining, the auto manufacturing and M&E sectors.

There is more uncertainty about current and prospective GDP growth rates for the world economy than a year ago. Although demand for the sector’s products has recovered since the financial crisis in 2008, demand growth has levelled off in unison with overall world economic growth. SA seems to have lost substantial ground in international markets during the upheaval in the aftermath of the crisis and has not been able to regain market share.

Domestic Economic and Steel Environment

The South African market represents on average about 40% of total production/sales of the M&E sector. The value of this market in 2014 is estimated to have been in the order of R190 billion. The domestic market for the metals and engineering sector depends largely on intermediate products supplied to mining (10%), construction (10%), machinery and equipment manufacturers (45%) and the auto sector (8%). Of the R190 billion SA market supplied by domestic companies, 90% were intermediary products or gross fixed capital formation in the SA economy.

The South African economic growth for 2014 is estimated to have been around 1,4%. Overall gross fixed capital formation (GFCF) is expected to have grown by 3,3% during 2014. The outlook for economic growth in 2015 is around 2,5% (if not lower, depending on the electricity situation) and investment more or less the same as 2014. Expectations are that both will improve further in 2016.

Of more direct interest to the metals and engineering sector is the outlook for infrastructure expenditure (a recent report by Nedbank showed that announced projects halved since 2013), mining sector investment prospects (which have not fully recovered after the strikes last year and are hampered by low commodity prices) and the performance of the auto manufacturing sector (with mixed prospects). Imports remain a large part of supply to the SA economy.

The Position of the Metals & Engineering Sector 

Last year (2014) was disappointing, despite the fact that a better performance was expected, when compared to 2013, because of prospects for domestic and international economic recovery at the beginning of the year. Neither materialised fully and the month-long M&E strike (on top of the five-month mining sector disruptions) weighed heavily on the sector. It is estimated to have contracted by nearly 2%, producing R488 billion or R117 billion of value add during 2014. This means that its production levels are still between 25% and 30% below the peak during 2007. Employment declined, capacity utilisation remained below optimum and profitability declined.

Without demand – or the prospects of growth in demand – and idle production capacity, profits do not materialise and no investments take place. This seemed to have been the M&E conundrum at the beginning of 2015.

The Policy Environment

There has been an overload of mixed and negative signals around the country’s development challenges. Of late, the National Development Plan and the elaboration of action plans in the Medium-Term Strategic Framework have become rallying points that promise more harmony. This is to be welcomed, although the “execution deficit” or perceived deficit remains a stumbling block.

“Uncertainty” has been rising since 2005 (high growth phase and ASGISA), and since then neither elections nor new blueprints led to any significant improvement. This is an ominous sign and calls for renewed efforts to rebuild confidence. The concern is that, if not arrested, the inner contradictions and ambiguity in policy may become destructive.

Any policy response must recognise the complexity of the sector and the fact that it is highly exposed to international markets and import competition. The sector has the same domestic constraints as all other sectors, but it seems to be losing its competitiveness. The support for higher value-added products internationally seems to be overwhelming SA producers. The strategy to tax upstream (commodity and basic metal) producers to compensate for international subsidies of imported products lower down the production pipeline is not viable. The former are competitive and earning foreign exchange, while the latter are not.

The metals and engineering sector has experienced slow and unstable growth since the financial crisis in 2007. The recent demand and production disruptions through various strikes have exacerbated already alarming trends, resulting in the sector contracting during 2014.

Industrial policy is caught between threats (international competition) and constraints (domestic infrastructure and logistics). These constraints are often under-estimated as physical restrictions on business. Without secure electricity supply, production cannot expand. Therefore, the impact of policies often has the effect of compensating for these constraints, instead of stimulating performance in the sector.

 

2015 and Prospects for 2016

The domestic economy is expected to grow by less than 2,5% during 2015 and closer to 3% in 2016. Fixed investment is expected to grow just over 3% in 2015 and by 4% in 2016.

The SARB leading indicator has been moving sideways for some time, which is in line with previous expansion periods. The Bureau for Economic Research (BER) general confidence index shows the same patterns, also for quite a few quarters. Both of these indicate slow growth for the future, which could be exacerbated by further policy uncertainty, labour unrest and the electricity constraint.

The two general manufacturing confidence indicators show ambivalence. Actual and expected manufacturing confidence showed declines. The business activity sub-index show growth in the fourth quarter of 2014, but the December number declined strongly, indicating the first signs of the impact of the electricity constraints on the M&E sector.

Prospects for international market growth depend a lot on economic recovery in Asia (40%), EU (35%) and Africa (22%) and North America (14%) of the market. Purchasing managers’ index indicators for all these regions, except the US and the UK, have been moving sideways or declined recently. Only the US growth performance seems to be sustainable, although Asian (Chinese) growth out-performs the rest, but at a slower pace than in the past.

Not surprisingly, growth in the demand for steel and related products has been moderating recently and is expected to be about 2%, with much lower prices and heavily-contested markets.
Imports of final and intermediary products have been crowding out domestic suppliers. Domestic manufacturers in the M&E sector are also more inclined to buy components from importers, thus decreasing domestic production.

International Trade dynamics

 

The sector recorded an overall improvement in its trade balance with the rest of the world in 2014. It meant that the sector’s trade deficit with the rest of the world shrunk.
This net result was achieved with the depreciating rand acting as shock absorber, countering falling export prices in dollar terms (in sympathy with the depressed commodity price cycle) and sluggish international demand.

Imports became more expensive (in rand terms), caused by the exchange rate depreciation. However, imported products became cheaper (in dollar terms), also due to lower international commodity prices. The price effect (higher rand cost for imports) and lower import volume demand within SA (due to sluggish growth) had the net result of imports not growing as much as they did in the years preceding 2014.

Africa continued to be a strong export market for the metals and engineering sector during 2014, particularly Southern African Development Community and West Africa. However, Africa’s growth is likely to slow down due to continued sluggish commodity demand internationally, significantly lower oil revenues and the drastic curtailment of investment in new ventures by companies and probably governments.

Despite some respite in terms of the trade balances not deteriorating as much as before, the sector as a whole is still overwhelmed by imports, primarily from Eastern Asia and Europe. Generally this is due to low international competitiveness, which cannot be solved by a continually-depreciating exchange rate. The more complex production becomes and the greater the share of domestic input cost (labour, electricity, transport, etc.), the less competitive the industries become. This is reflected in the sector’s long-term trade balance trend.

The medium- to longer-term impact of instability of domestic production (industrial relations, electricity etc.) disruptions and, therefore, security of supply to international customers has not been discounted yet and should be of added concern for the future.

Electricity constraint and its impact on South Africa’s economic growth

There is very little doubt that reliable energy supply is of vital importance to the growth of any country’s economy. Unstable electricity supply brings business operations to a standstill and hampers long-term economic growth.

South Africa has, over the years, experienced frequent energy supply shortages. In addition, uncertainty about the security of its supply going forward as well as constant reports of delays in solving supply challenges are bound not only to impact negatively on South Africa’s already ailing economy, but also to change how the country is perceived as an investment destination.

On average, energy costs in the metals and engineering sector account for about 8% of intermediary input costs. It, therefore, stands to reason that, without reliable energy supply, the sector cannot grow. It is very unfortunate that even right now the sector cannot operate at full capacity as a result, among other things, of energy constraints.

Actual or realized economic growth in the South African economy has fallen substantially below its potential. While energy provision should support our growth ambitions, there appears to be a real danger of the two gradually drifting apart.

South Africa is now seriously in danger of falling below a 2,5% average in this decade. This is mostly owing to the fact that although the economy had grown faster in the past decade (2000/2010) than recorded during the seventies, South Africa missed the last super cycle and completely under-estimated the economy’s accelerated energy demand over this period.

As a country, we need to tackle this challenge with a single-minded determination as though we were going to war. Without a sufficient and secure supply of energy – and, in this case, electricity – it is not possible for South Africa to be globally competitive.

 

About Mr Langehoven

Mr Langenhoven is currently a Chief Economist at SEIFSA. He boasts 30 years of applied economic research at some of the highest public institutions in the land as well as extensive research and work experience in the private sector. He has headed a diversified and influential private sector business association in the construction sector, guiding it through very difficult and volatile financial times.

Mr Langenhoven holds a BA degree majoring in Political Science, African Studies and Economics, a BA Honours degree in Political Science and a Master’s degree in Economics, all from Stellenbosch University.

A member of the International Trade Administration Commission of South Africa, Mr Langenhoven also actively participates in various forums such as NEDLAC, BUSA, and the South African Reserve Bank economic roundtable discussions, amongst others. These opportunities make it possible to influence economic policy and legislation.

Read More
[i]
[i]
[i]
[i]