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About The State of the Metals and Engineering Report

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The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is the undisputed voice of the metals and engineering sector in South Africa and the region. Its knowledge and understanding of the sector are unequalled.

Since its formation in 1943, SEIFSA has seen the metals and engineering sector go through great times and – especially in recent years – challenging times. Not only has it kept pace with developments in the sector, but often it has been a crucial – and sometimes indispensable – part of those developments and a reliable voice of the sector.

Long known for and strongly associated with collective bargaining, SEIFSA offers various products and services of great importance to companies in the metals and engineering sector, including those in other economic sectors with close links to this part of the economy. It boasts four Divisions led by respected experts in their respective fields – Economics and Commercial; Industrial Relations and Legal Services; Human Capital and Skills Development; as well as Safety, Health, Environment and Quality. These services range from consulting through to training, both public and in-house.

Our revered Economics and Commercial (EC) Division is a repository of much of the information on the sector’s economic performance over the years. For more than half a century, the EC Division has published the unique and indispensable SEIFSA Price and Index Pages (PIPS). Over the past two decades, the Division has also conducted training for those keen to benefit from our training in Contract Price Adjustments (CPA).

It is a privilege to present to you the State of the Metals and Engineering Sector 2019 to 2020, which has been compiled by Dr Michael Ade and Ms. Marique Kruger.

The metals and engineering sector has experienced considerable challenges in recent years. We consider it to be imperative that policy makers take relevant steps to protect it and its sub-industries, on a temporary basis, from more internationally-subsidised and efficient producers in order to boost local production capacity and ensure their competitiveness. To this end, designation and localization of production processes is vital, as is the ring-fencing of strategic imported inputs to explore the possibility of producing them locally.

This comprehensive State of the Metals and Engineering Sector Report provides key insights to such a stance by highlighting some of the most imported inputs.

I have not the least doubt that all who monitor closely he fortunes of the broad metals and engineering sector and its sub-sectors in Southern Africa, and those with even a passing interest in it and its related sectors, will find this Report invaluable. As usual, I commend this Report highly to all who are keen to understand a very important – and strategic – part of the broad manufacturing sector, and thank Dr Ade and Ms. Kruger for their labour of love.

Both Michael Ade and Marique Kruger are available for consultations with stakeholders interested in deepening their understanding of the metals and engineering sector and its sub-industries. They can be reached at Michael.ade@seifsa.co.za and marique@seifsa.co.za by those companies keen to invite them to help during their strategic planning sessions, for consultations on any aspect of the sector or to book CPA training.

We, at SEIFSA, values you, as an important stakeholder in the metals and engineering sector. We wish you everything of the very best in 2019.

Sectoral Level Economic Research

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The EC division published a fifth further enhanced version of its State of the Metals and Engineering Sector Report in January 2018. The Report which entails research triangulation and robust statistical analyses (including descriptive, inferential and statistical modelling) takes an annual look of the sector, elaborating on the drivers and underlying dynamics of observed variables like production, demand, employment, intermediate input costs, profit trends, export competitiveness, investment and capacity utilization.

Over the years, the Sector Report has become the benchmark for monitoring business activities and developing economic trends on a sub-industry and sector level. The sub-industries covered included the rubber, plastics, basic ferrous, basic non-ferrous, metal products, machinery and equipment, household appliances, electrical machinery and equipment, transport equipment as well as parts and accessories for motor vehicles. Tracking progress of these various sub-components during the year relative to the initial prognosis and outlook proved to be a powerful tool for understanding the health of the sector.


The report relies on recognized external sources of data. These include Statistics South Africa, the South African Reserve Revenue Services, Quantec and the World Bank. These are complemented by other sources such as the Economic Trend South Africa and the Industrial Development Corporation. The availability of accurate and credible economic information on sub-industry level is a resource available to members, but not fully utilised. Great effort was made to ensure that the type of data used, the sources and the methods employed in compiling the data are bench-marked to both national and international standards.

The information is analysed in a unique way to produce an overview of the national and international standards. The information is analysed in a unique way to produce an overview of the national and international standards. The information is analysed in a unique way to produce an overview of the national and international environment, vividly depicting the state of the local M&E cluster, highlighting the important drivers of growth and concluding with a predictive annual outlook.

The purpose of the State of the Metals and Engineering Sector Report

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The purpose of the State of the Metals and Engineering Sector Report

The main aim of the report is to track whether the sector is expanding or declining and several longitudinal data and trends (which are often very volatile) are monitored accordingly. The study makes use of an eclectic methodology in its analyses and entails comparing the most current data point to the one immediately preceding it. It also makes use of a monthly and annual analyses, including several year-to-date versus previous year comparisons. The approach helps in contextualising the growth trend in the industry, in generally highlighting the various drivers of growth (or lack of) and in predicting output trends in the sector with a high confidence interval. Ad hoc monthly commentary and periodic reviews are subsequently published as derivatives of the research report.

The second objective of the study is to provide an intrinsic understanding of the dynamics of observed trends. The analysis in this regard is evidenced-based, robust and compelling, further igniting several discourses. Resultantly, more in-depth reviews and opinion pieces of specific drivers have been conducted and published in several platforms. Some of these include the SEIFSA News journal and domestic newspapers including technical publications.

The third objective is for the report to ignite interest and provide evidenced-based impetus for collaboration advocacy and lobbying. Collaboration and lobbying should be aimed at reducing specific constraints as identified in various internal for a within SEIFSA. Given that the EC division acts as a repository of much of the information on the sector’s economic performance over the years, an important aspect of the research is, therefore, in facilitating advocacy and lobbying initiatives in several external forums.


The level of advice sought from SEIFSA by policy makers and the impact it had dealing with metals crisis over the years proved how valuable this can be. SEIFSA has received positive indications that it will still be part of a soon to be reconstructed steel price monitoring committee and this is good for the industry. SEIFSA currently serves in other forums including the Technical Sectoral Liaison Committee (TELESICO), the National Economic Development and Labour Council’s (NEDLAC’s) Trade and Industry, Economic Development, Manufacturer’s Trade and Tariffs forum and BUSA’s Economic Policy and Tax Policy committees, including other sub-committees.

A substantive input was made when EIFSA recently held a high-level meeting with President Ramaphosa’s Economic Adviser and a team of investment envoys of the South African government. The meeting provided an opportunity for all parties to discuss salient issues affecting investments into the M&E cluster in particular and the broader manufacturing sector in general. Moreover, it also reaffirmed the importance of business maintaining a good working relationship with the Government (and the governing party) and to continuously work towards broadly improving local economic conditions.

Another substantive input was made when SEIFSA and Transnet recently launched a joint Working Group (WG) with the mandate of addressing prevailing inefficiencies towards ultimately reducing logistics costs for the businesses. Effectively three working streams were created by the joint SEIFSA-Transnet WG to continue with the objective of the working group. These include the logistic efficiency, the competitiveness and benchmarking work streams. Progress reports from these initiatives will be made available to stake holders on a regular basis as stipulated in the WG terms of reference document.

What does the future promise?

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What does the future promise?

The main question is what should be done to ensure that the sector is more competitive, export more and possibly improve profits and employment numbers?

The continued survival of the sector depends, as far as the domestic economy is concerned, crucially on the health and growth of the sectors which are drivers of its demand, namely mining, construction and automotive sectors. Hence the urgent need to conclude issues around the mining charter in order to attract so much needed investments across the board and boost domestic growth. In addition, the need to grow market share in regional markets and also mitigate potential risks from the existing trade war between two of the World’s largest economies is also important.

Also, part of the answer is that all the stakeholders within the sector must put differences aside and collaborate more. A salient and undeniable fact is that the industry is notorious for being more reactive than proactive when dealing with challenges. Although some intermediate products of the metals and engineering cluster are close substitutes, unscrupulous tactics should not be used by one sub-industry over the other, to gain competitive trade advantage. Competition is encourage, albeit in a business-as-usual atmosphere rather than belligerently. Without co-operation, all businesses including the small, medium and micro enterprises cannot flourish and expand. Intra-industry squabbles are counterproductive to the objectives of the National Development Plan (NDP) in the long run, thereby, constricting the effective implementation of its long-term socio-economic road map, with dire consequences on jobs and economic development.

There has been a relative reduction in import volumes, thanks to the protection measures for downstream steel industry (safeguard tariffs) announced by the government. Also, the establishment of a R1.5 billion (over three years) downstream steel industry competitiveness fund, through interest rate subsidy, will relieve some pressure due to a number of structural factors which have undermined the sector’s competitiveness. This had resulted in a number of firm closures and more than 6% related job losses.


Longer-term survival and recovery, however, needs a whole paradigm shift in policy measures and company behavior. There is need to contain input costs and further mitigate the impact of both the 2007/8 financial and economic crises and the 2014 productions crisis which are still felt in the industry. Also, the negative effect of the Chinese economy which is simultaneously slowing down and overwhelming world markets with cheap exports need to be contained. Encouragingly early indications suggest there has been no unusual spike in imports despite the existing trade war.

Increased trade and interdependence with the rest of Africa should receive a boost from a new R13,4 billion export trade facility launched by the Export Credit Insurance Corporation of South Africa (ECIC) and the African Export Import Bank (Afreximbank). This should boost exports from South Africa to the rest of Africa with a combined population of about 1,2 billion people and GDP of roughly US$2,2 trillion. Companies in the sector need to “sharpen the saw” and focus more on the exporting to the SADC region (including SACU), especially given the favourable growth forecast for the region. Of total exports into Africa, almost 81% are destined for SADC, West Africa (8,7%), East Africa (8,9%), North Africa (1,3%) and Middle East (0,5%).

Importantly, a ‘cluster’ approach to the dynamics of each sub-industry is needed. As highlighted in the State of the Metals and Engineering Sector Report for 2018/19, each sub-industry within the sector has its own unique exposure to national and international markets, its own capital or labour intensities and its own productive capacity constraints and production cost challenges. Gross fixed capital formation (new investment) is clearly needed by all the sub components, in order to improve productive efficiencies to that of world benchmarks and to grow.

The M&E sector is intimately linked to the fortunes of the agricultural, mining and quarrying, construction and auto sectors (and to some extent, the electricity and transport sectors). The signs of recovery in each of the aforementioned sectors (and export demand) is crucial for the M&E sector over the longer term. Stimulation and redirection of domestic general government procurement demand towards domestic metals and engineering producers is a policy measure over South Africa has control. The recent initiative by the DTI aimed at designation, localisation and supplier development is lauded as a significant tool in the industrial policy toolkit’ to support the broader manufacturing sector.

This is especially given that government has the largest procurement spend.  The steel industry seems to be the earliest beneficiary but the expectation is for the benefit to trickle down to other industries in the M&E cluster. In addition, enhanced cost-effectiveness and moral suasion is also needed to ultimately attract private sector demand as well.