Skills Development Seminar Presentations - 29 February 2016
Skills Development Seminar Presentations
- Skills Development Seminar 2016
- Training committee’s
- merSETA - Mandatory grant Year 17 - FEB 2016
- SEIFS Skills Development Seminar - 29 February 2016
- SEIFSA - Rajen G - Skills development presentation - 12.2.2016
- Learnership Allowance and ETI
Press Release - 2016/02/29: THE CONTINENTAL FREE TRADE AREA IS PARAMOUNT IN UNLOCKING AFRICA’S ECONOMIC GROWTH POTENTIAL
Speaking ahead of the 2nd annual Southern African Metals and Engineering Indaba scheduled to take place in Sandton on 26 and 27 May, Mr Nyatsumba said that the Continental Free Trade Area presented many opportunities for African countries to trade among themselves and was paramount in unlocking Africa’s economic growth potential.
Turbulent economic conditions that the world was currently experiencing made 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 activitiesmin the continent,” Mr Nyatsumba said.
He added that mining activities create opportunities in other economic sectors such as retail and manufacturing. Therefore, it was of critical importance that African countries take full advantage of opportunities presented by the Continental Free Trade Area.
Mr Nyatsumba said that although intra-African trade has increased over the years, a lot still needed 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 restrictions 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,” Mr Nyatsumba said.
The Continental Free Trade Area and its Implications for Manufacturing in Southern Africa will be one of the main topics for discussion at the 2016 Indaba scheduled to take place at the Industrial Development Corporation (IDC) Conference Centre in Sandton.
Assessing the implications that the implementation of the Pan-African Continental Free Trade Area will have for the Manufacturing sector in Southern Africa will be:
- Common Market for Eastern and Southern Africa Secretary-General Mr Sindiso Ngwenya,
- SacOil Chief Executive Officer Dr Thabo Kgogo
- and Independent Director of Companies Mr Mike Spicer, among other speakers.
The Southern African Metals and Engineering Indaba will be attended by policy and decision makers, business owners, senior executives and other stakeholders in the metals and engineering sector in the SADC region, and will focus on the following topics, among others:
- Government Policy Interventions for a Sustainable, Globally-Competitive Steel Sector
- Partners, Not Adversaries: How to Forge A Stronger Partnership Between Business and Labour to Improve Southern Africa’s International Competitiveness
- A Delicate Balancing Act: The Link Between the Metals and Engineering Sector and the Mining, Construction and Car Manufacturing Industries
- Parasitic or Symbiotic: Relations Between Small Business and Big usiness in the Metals and Engineering Sector
- Southern Africa and the Huge Infrastructure Backlog - How to finance it.
Organised and hosted by SEIFSA in partnership with the IDC, the Indaba is aimed at encouraging growth in the metals and engineering sector, which has under-performed over the past five years.
The list of the 2016 Indaba speakers and panelists includes Former President Mr Kgalema Motlanthe, Scaw Metals CEO Mr Markus Hannemann, Black Business Council Vice-President Mr Sandile Zungu, International Monetary Fund Senior Resident Representative Dr Axel Schimmelpfenning, Centre for the Study of Democracy Director Professor Steven Friedman, Executive Chairman of the EU Chamber of Commerce and Industry in Southern Africa Mr Stefan Sakoschek, US Embassy Economics Minister Mr Laird Trieber and Massmart Chairman Mr Kuseni Dlamini.
Delegates booking before 31 March will enjoy a 25% discount.
From the Chief Executive Officer's Desk - February 2016
From the Chief Executive Officer's Desk - February 2016
By Kaizer M. Nyatsumba | Chief Executive Officer
By all accounts, this will be another tough year for South Africa. The prospects are not good at all. Our economy continues to be on the doldrums and our currency, the Rand, is far from recovering from the downward slide of 2015, which was worsened by President Jacob Zuma’s inexplicable decision to drop then Finance Minister Nhlanhla Nene from the Cabinet.
Ordinarily, tough times require us, as compatriots, to work much closely together to solve whatever challenges confront us, in the interest of our beautiful country. This makes close co-operation and collaboration between and among all key stakeholders – in particular the Government, business and labour – all the more imperative.
Regrettably, for a whole host of reasons, it appears that some South Africans are drawing apart at the very time when they need to be cohering. Last year ended on a terrible note, with all sorts of racial insults flying around, and 2016 started in very much the same way. On 2 February 2016 – which marked the 26th anniversary of the day on which the last president of apartheid South Africa, Frederik Willem de Klerk, took the country and the world by surprise when he announced, during his State-of-the-Nation address to Parliament, the unbanning of thitherto proscribed political organisations and the unbanning of Nelson Rolihlahla Mandela and other political prisoners – a group of South Africans indicated its intention of laying charges of apartheid-era human rights violations against Mr De Klerk.
As respected political analyst Professor Steven Friedman noted during our strategic planning session in December last year, racial frictions are growing more pronounced at a time when South Africans need to be pulling together in the same direction. That is most unfortunate. At a time like this one wishes that one had a magic wand that one would wave around and ensure that South Africans overcome their racial hang-ups and work together as a coherent nation.
Similarly, one wishes that the same magic wand would ensure a higher degree of maturity among the three stakeholder groups vital for our economy’s performance: the Government, business and labour. For as long as these important stakeholder groups do not accept one another’s bona fides and work together as a team, our beloved country, South Africa, will not realize its true potential.
This non-alignment between business and labour is likely to play itself out yet again when our sector negotiates with labour on wages and conditions of employment next year. When that time comes, we are likely to see business and labour speaking past each other, as though they live on different planets, at a time when the metals and engineering sector is bleeding.
Those negotiations are still a year away from now. At the end of each round of negotiations, inevitably some companies in Associations affiliated to SEIFSA cry foul, arguing that a deal was struck without their mandate or knowledge. Objectively, of course, such claims are not valid because SEIFSA acts strictly in accordance with the mandate given to it, and does not take decisions at all on matters that are the subject of negotiations.
Following the complaints that we received at the end of the 2014 negotiations and what we were told by various companies when we subsequently met them to explain how the process had gone, one thing became blatantly clear: there is considerable room for improvement when it comes to communication between some Associations, which are the ones which give SEIFSA a mandate, and the companies that belong to those Associations.
We at SEIFSA are keen to ensure that the apparent chasm that exists in the aforementioned case is bridged so that the mandate coming from the respective employer Associations will be truly representative of the companies that they represent. Therefore, we ask that all member companies in Associations affiliated to SEIFSA participate actively within their Associations, especially in discussions leading to the formulation of negotiating mandates. It is vitally important that that active involvement starts now and continues right into and throughout the negotiations in 2017.
Please, do participate, dear member company. The Associations represent you and your interests, and SEIFSA represents their collective interests. They cannot represent your interests effectively unless they know what they are because you will have articulated them in their meetings.
However, member companies must also be aware of the fact that their views, expressed through their Association, do not on their own constitute SEIFSA’s mandate. Just as companies have to make their voices heard within Associations and get matters debated until a consensus emerges which represents the views of that Association, the same happens in the case of Associations at SEIFSA Council Meetings. There, too, our member Associations debate matters vigorously among themselves and emerge with a consensus which represents the views of the SEIFSA Council. It is the consensus views of the SEIFSA Council – and not those of one Association or two – that constitute SEIFSA’s mandate.
Personally, I am very keen to ensure that we do not have companies complaining, after the conclusion of the 2017 negotiations on wages and conditions of employment, that they were kept in the dark or did not participate in shaping the Federation’s mandate through their respective Associations. We at SEIFSA have absolutely no interest in this or that kind of settlement. Instead, our role is strictly to execute the mandate of our member Associations, and not to lead them in one direction or another. When it comes to negotiations, we no more than agents carrying out the wishes of their members. It is important that all companies keep that in mind as they begin their preparations for the 2017 MEIBC negotiations. It can hardly be fair for SEIFSA to be blamed, as has often been the case, for negotiation outcomes that were not of the Federation’s doing.
My challenge to all companies that are members of Associations affiliated to SEIFSA is simple: get involved in shaping your Association’s – and, therefore, indirectly SEIFSA’s – mandate for the 2017 wage negotiations. You will have nobody but yourself to blame if you should choose not to be involved.
The SEIFSA Awards for Excellence for 2015 are upon us. This is yet another opportunity for us to recognise excellence in our sector.
If you care enough about manufacturing in Southern Africa in general and the metals and engineering sector in particular and believe that you are one of the companies that excel in one or other part of business, then you also don’t want to miss out on the opportunity to enter for the SEIFSA Awards for Excellence so that you can be recognised publicly for your excellence and be rewarded for it.
There are seven categories in which you can seek to be recognised by a panel of independent experts. These are:
- Most Innovative Company of the Year, to be awarded to a company that has shown the best level of innovation in Research and Development or Production, in the process either gaining market advantage or reducing production costs;
- Health & Safety Award of the Year, to be awarded to a company with the best legal compliance record when it comes to Health and Safety or the lowest Lost Time Injury Frequency Rate (LTIFR);
- Best Corporate Social Responsibility Programme of the Year, to be awarded to a company with a CSI project that makes the biggest impact on the lives of its beneficiaries;
- Customer Service Award of the Year, to be awarded to a company with the best/highest rating by its customers for its performance in customer service;
- Most transformed company of the Year (X2), to be awarded to the most transformed company in terms of the composition of its Board of Directors, Executive Management and Managerial Team: one category will pit companies employing fewer than 100 people against one another, and the second category will pit companies employing more than 100 companies against one another.
- Decade of the Artisan Award, to be awarded to a company with the highest number of artisans trained each year (for itself and/or the industry).
- Among the awards to be given out in the CEO’s Awards category will be one for the SEIFSA-affiliated Employer Association of the Year, to be given to an Association that has worked hard to grow its membership and to ensure alignment with the Federation and its other Associations.
So, does your company excel in anyone of the categories mentioned above? If so, enter the SEIFSA Awards for Excellence and stand a chance to be recognised for your excellence. Such recognition should help you to improve morale among your employees, to motivate them and, through your marketing efforts, to get your company to stand out among its competitors.
Winners of the SEIFSA Awards for Excellence will be announced at a dinner that will take place on 26 May 2016, the first day of the Southern African Metals and Engineering Indaba 2016. Now in its second year, this vital conference will take place on 26-27 May at the IDC Conference Centre in Sandton, following our conclusion of a strategic partnership with the Industrial Development Corporation.
Now in its second year, the 2016 Southern African Metals and Engineering Indaba will be bigger and better, with speakers from our sector and related sectors, such as auto manufacturing, construction and mining. Former President Kgalema Motlanthe will open the conference and Democratic Alliance leader Mmusi Maimane will deliver the closing address.
Register now. In recognition of the current state of our sector and the economy, delegate fees have been reduced – and there is a 10% discount for those registering before 15 March 2016! Don’t miss out. Book now.
I look forward to seeing you at the second Southern African Metals and Engineering Indaba in Sandton on 26-27 May.
Press Release - 2016/02/25: SEIFSA WELCOMES MINISTER GORDHAN’S BUDGET
Speaking after Finance Minister Pravin Gordhan’s budget speech this afternoon, SEIFSA Chief Economist Henk Langenhoven said the budget indicated that the primary balance (current expenditure vs income) will be positive from this budget period onwards.
During his budget speech, Minister Gordhan said that the Government will:
- cut the spending ceiling over three years of the Medium-Term Expenditure Framework;
- cut consumables such as travel and vehicle purchases;
- restrict the filling of expensive vacancies and reduce headcount through betterpersonnel practices;
- contain spending by cutting R25 billion off the State’s R500 billion a year procurement spend and investigate all contracts with a value of R10 million and higher.
“These are welcome but high targets to meet. If achieved, this budget may indicate a turning point,” Mr Langenhoven said.
He added that it seemed clear that provinces and local authorities had reached their peak in terms of headcount and drag on the fiscus, with no increases in spending allocations and strong indications from the Treasury that they will have to consolidate.
This may be the benefit of Minister Gordhan’s stint at Cooperative Governance and Traditional Affairs and his intimate knowledge of the dynamics there.
Mr Langenhoven said notwithstanding the Government’s concrete plans to cut its expenditure significantly, he remained of the view that Minister Gordhan’s speech lacked solid measures to improve domestic demand.
“In the light of the very soft and hugely competitive international trade environment, one of the best stimulatory measures within the Government’s control would be to channel spending to local producers,” he said.
The Minister listed initiatives to support growth and development, many of which are commendable, such as building on the success of the independent power producers’ programme, fostering agro-processing and streamlining trade flows, among others. Mr Langenhoven expressed concern that not much was mentioned about stimulating the local economy by allocating spending to local producers.
Commenting on the extent to which the Minister’s speech re-established general confidence in Government and the country, Mr Langenhoven said that the Minister struggled to find any signs of confidence returning in terms of positive economic data.
He said that studies showed that the perceived positive impact of a weak currency on competitiveness and exports is not well founded and the decline in the terms of trade was further evidence of that.
However, the announcements of measures to enhance fiscal constraints in the face of severe pressures for expanded involvement of Government either as direct employer or spending increases contributed to confidence building.
“Much has been achieved by this budget, although uncertainties abound. Much more needs to be done to change course on complimentary policies that are inhibiting growth and investment. World economic recovery will happen, but whether South Africa will be part of such a recovery rests a great deal on its own efforts,” Mr Langenhoven concluded.
Press Release - 2016/02/06: HIGH ELECTRICITY PRICE INCREASES WILL HAVE A CRIPPLING EFFECT OF THE ALREADY EMBATTLED METALS AND ENGINEERING SECTOR (2)
Speaking at the NERSA public hearings on Eskom’s regulatory clearing account application held at the Gallagher Convention Centre in Midrand today, SEIFSA Chief Economist Henk Langenhoven said if the quantum of the application goes through, the already embattled metals and engineering sector would be further crippled.
“SEIFSA is not in favour of any increases. If an increase is absolutely necessary, a much lower percentage increase should be proposed,” Mr Langenhoven said.
He added that collectively the mining, construction, the auto and metals and engineering sectors contribute nearly 20% of South Africa’s gross domestic product, hence sustaining these important sectors was crucial for the economy.
“The performance of these sectors has deteriorated significantly since June last year and the outlook for the next two years remains dire. Exorbitant electricity price increases will have a crippling effect on these sectors in general and the already declining metals and engineering sector in particular. The metals and engineering sector exports 60% of its production and international competitiveness is key to survival; any electricity cost increase will erode it even further,” Mr Langenhoven warned.
Production in the metals and engineering sector has not recovered since the 2008/9 financial crisis and has deteriorated further since June 2015. Production is currently 30% below the peak of 2007.
The possible overall impact of the envisaged electricity price increases on inflation had been captured by the South African Reserve Bank and the assumptions were that any increase would return to +/-13% in 2016/17 and 2017/18.
“In this scenario, headline inflation would be 0,1 to 0,4 percentage points higher at an average of 5% and 6,5% for 2015 and 2016 respectively. Most of the impact would be felt through the direct effects of electricity prices, which have a weight of 4,13% in the consumer price index basket. This does not show the impact on producers, of course. The indirect effects are estimated at 0,5 percentage points during 2016,” Mr Langenhoven said.
Although electricity was not a large portion of production inputs in the metals and engineering sector, its importance was nevertheless equivalent to blood in the human body: without pressure and/or loss of blood, death can be expected. In the metals and engineering sector’s case, business closures and employment losses would t be a given.
Press Release - 2016/02/08: STRUGGLING METALS AND ENGINEERING SECTOR TO COME UNDER SCRUTINY AT INDABA
To be held at the Industrial Development Corporation (IDC) in Sandton from 26 to 27 May 2016, the 2nd annual Southern African Metals and Engineering Indaba will be officially opened by former Deputy President Kgalema Motlanthe.
The IDC’s Divisional Executive of Corporate Affairs, Zama Luthuli, said that it is important that institutions such as the IDC support such critical initiatives, given the important role of the sector in the national economy.
“The indaba provides an occasion both for industry players and Government to engage and come up with solutions to address issues impacting the sector,” said Ms Luthuli.
SEIFSA Chief Executive Officer Kaizer Nyatsumba said the Federation was delighted to welcome the IDC on board “as a strategic partner for the 2016 Metals and Engineering Indaba”.
“In many ways, the partnership between SEIFSA and the IDC, proud institutions both in their 70s, is eminently logical and sensible. SEIFSA and the IDC are instrumental in the industrialisation of the country, in our case through the contribution of the metals and engineering sector,” Mr Nyatsumba said.
Some of the issues to be discussed during the indaba include:
- Moving Forward or Going Back: Is Manufacturing in Southern Africa Doing Better than It Did a Year Ago?
- Government Policy Interventions for a Sustainable, Globally Competitive Steel Sector ransformation As a Strategic Weapon/Business Enabler in Southern Africa
- Partners, Not Adversaries: How to Forge a Stronger Partnership Between Business and Labor to Improve Southern Africa’s International Competitiveness
- A Delicate Balancing Act: The Link Between the Metals and Engineering Sector and the Mining, Construction and Car Manufacturing Industries
- The National Development Plan: What Projects are actually Being Implemented and Do We have the Necessary Human Capital?
Delegates registering for the second Southern African Metals and Engineering Indaba before mid-March will enjoy a 10% discuss. Details are available on www.meindaba.co.za.
From the Chief Executive Officer's Desk - November/December 2015
From the Chief Executive Officer's Desk - November/December 2015
By Kaizer M. Nyatsumba | Chief Executive Officer
There are probably not many South Africans who will look back upon 2015 as a year in which they made much economic progress. For many of us, this will go down as having been an annus horribilis on many levels.
For a start, most South Africans are poorer at the end of 2015 than they were this time last year or, indeed, at the beginning of this year. The terrible depreciation of the South African Rand has meant that South Africans’ buying power has been considerably reduced when it comes to imports from the United States of America, the United Kingdom and the European Union, among other countries. Individually and collectively, we can buy less now than we could a year ago.
While a weak currency is supposed to be good for exports, South Africa Inc. has not really benefitted much during this period. Instead, the balance of payments has worsened, jobs have been lost in different sectors of the economy and Government debt has soared. Some sectors have been hardest hit than others, with the problem faced by the metals and engineering sector worsened by the glut of steel around the world as well as the poor performance of the mining sector locally and internationally as the Chinese economy cooled down.
On top of that, South Africa’s international credit ratings and, therefore, creditworthiness deteriorated in the course of the year, with the country now merely a notch above junk status at the time of writing. We have also plunged on various indices that compare countries’ performances in various areas, with South African schools placed last for performance in mathematics.
The metals and engineering sector has suffered probably its worst performance in years. As a result, some companies have folded, while others ended up in business rescue or barely surviving and having no option but to embark on retrenchments to reduce their input costs. We at SEIFSA were similarly affected. With companies being liquidated or laying employees off, inevitably the Federation found itself with fewer companies being members of its affiliated Associations and with those companies employing fewer people at the end of 2015 compared to the same time last year.
The metals and engineering sector has suffered probably its worst performance in years. As a result, some companies have folded, while others ended up in business rescue or barely surviving and having no option but to embark on retrenchments to reduce their input costs. We at SEIFSA were similarly affected. With companies being liquidated or laying employees off, inevitably the Federation found itself with fewer companies being members of its affiliated Associations and with those companies employing fewer people at the end of 2015 compared to the same time last year.
As we get ready to bid 2015 farewell, many compatriots cannot wait for the year to end and for 2016 to begin in the hope that it will be a much better year. Judging by how far the country has regressed in many areas in the current calendar year, there is a good chance that we have reached a nadir as a nation and that things can only be better from here on. We can, but, only hope. After all, hope for a better tomorrow is all that makes today bearable.
While the global economic situation is anything but satisfactory, nevertheless our problems as a country are compounded by lack of visionary leadership and dogged commitment to long-discredited ideologies. Our country is crying out for visionary, inspirational political leadership that will reach out to business and labour in a living partnership that will propel South Africa on a new economic trajectory. Regrettably, there is no promise of such political leadership on the horizon at the moment.
However, we – as ordinary citizens and business leaders – are not entirely powerless. Our country needs all of us to do our bit, in our little corners, to speak out and to make a difference. This entails us accepting one another for who and what we are and working together and with other stakeholders in business, labour and government to bring about what little difference we can.
As you take time off to recover during the December holidays from the trials and tribulations of 2015, do the best that you can to focus not on the year that was, but on a hopefully much better year. Do not dwell on what was and might have been, but focus on what may still be. Here is hoping for a safer, stabler and more prosperous 2016.
Press Release - 2015/11/11: METALS AND ENGINEERING SECTOR CONTINUES TO CONTRACT
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.
Press Release - 2015/11/09: SOUTH AFRICAN ECONOMY ON THE VERGE OF A RECESSION
This has been a strain on South Africa’s actual economic growth and raises questions about whether the economy is not headed for a recession, the Steel and Engineering Industries Federation of Southern Africa said today. SEIFSA Chief Economist Henk Langenhoven said that the latest manufacturing capacity utilisation data indicate that the situation worsened to 5% below optimum during the third quarter of 2015, which turned out to be the worst of the three quarters this year.
Mr Langenhoven said that, read in conjunction with the latest electricity production figures also released last week, a similar deteriorating trend was observed for the third quarter. The three-month average electricity production fell by 1,3% during the second quarter, which was exactly the same as the decline in gross domestic production (GDP) in that quarter.
“The latest data show an average contraction of 1,9% for the third quarter. This is very concerning in light of the imminent release of GDP numbers for the third quarter,” Mr Langenhoven said.
A similar, deteriorating third-quarter trend was evident in the overall Barclays purchasing managers’ index (PMI). Mr Langenhoven remarked that although over the first 10 months of the year the PMI was 2% higher than during the same period in 2014, the data seem to indicate that conditions have deteriorated since the middle of 2015. The seasonally-adjusted overall index declined by 3,6% in October compared to September 2015, and by 3% on October 2014, he said.
In comparison to manufacturing, the metals and engineering sector capacity utilisation was at nearly 10% below optimum, and has also deteriorated by 2% when the first three quarters of 2015 are compared with the first three quarters of 2014. Capacity utilisation during the third quarter of 2015 was even lower (-4,2%) than that during the strike-affected third quarter of 2014.
Looking for signs of possible improvement into the future, the business activity sub-index of the PMI is useful as it leads actual metals and engineering production by one- and-a-half years. For the first 10 months of 2015 compared to 2014, this indicator improved by 5,5%.
Over a 12-month period the improvement was 4,5%. Both these comparisons show the base effect of the 2014 strike and electricity disruptions. Mr Langenhoven said that, looking closer at the trend followed by the business activity sub-index since July 2015, it revealed a near-10% decline to October.
He warned that if this pattern continued, recovery in the metals and engineering sector would be postponed further to the end of 2016, contrary to earlier expectations. “The metals and engineering sector represent 28% of manufacturing and has been in recession since the middle of 2014.
The current data show little evidence of recovery. Manufacturing has had two quarters of decline since the fourth quarter of 2014, and the latest data releases also indicate a third-quarter decline.
This may indicate that the overall economy will also be in recession when third-quarter data are published,” Mr Langenhoven concluded. SEIFSA is a national Federation representing 27 independent employer associations in the metal and engineering industries, with a combined membership of over 2 000 companies employing over 200 000 employees.
The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.
Press Release - 2015/10/22: MEASURES TO STIMULATE THE ECONOMY UNLIKELY TO ACHIEVE THEIR OBJECTIVES
Mr Langenhoven said that despite undertakings by Mr Nene in his budget speech in February to stimulate economic growth and to keep a tight rein on Government spending, there had been lacklustre growth and the public wage bill had grown by two percent faster than inflation.
“These developments have left the Minister with virtually no policy space to stimulate the economy. One gets the feeling that he is simply buying time and accepting lower growth in economic expansion and investment for the next two years,” Mr Langenhoven said.
He said that the structural reforms that were needed to accelerate growth all related to capital expenditure that would only have an impact over the medium to longer term. These included a long list of projects, but Minister Nene pointed out that capital spending had declined in real terms and that capital transfers to local authorities – which had the least capacity to implement programmes – had grown.
“The project to re-establish a national capital budgeting framework probably had the most potential over the longer term, but there appears to be a national consolidation plan for capital expenditure budgets, at a time when localised integrated development plans were not successful in the past,” Mr Langenhoven said.
He added that the other side of the coin of lower capital expenditure was Mr Nene’s predicament to contain the impact of above-inflation growth in personnel-intensive sectors such as health, education and security. He said that spending under the economic classification heading of “economic affairs” had grown by 5,9%, with “industrial development and trade” faring the worst with a 4,7% higher allocation.
“The result of the low economic growth and exploding personnel cost dynamics is that deficit reduction has been postponed yet again. The consolidated debt-to-GDP ratios expected to stabilise at 49%, higher than previously thought. Secondly, the deficit before borrowing will be marginally lower than expected this year (3,8% instead of 3,9%), but higher in the following years: 3,3% for 2016/17 instead of 2,6%, 3,2% for 2017/18 instead of 2,5% and 3% by 2018/19,” Mr Langenhoven said.
He said that the primary deficit has been negative since 2008/9 and was hard to eliminate. He said that although there were plans to reduce it, the fact that South Africa was bad when it came to implementation of its plans will eventually erode confidence.
Mr Langenhoven said that the Federation was very concerned that the latest statements and proposed legislation emanating from the African National Congress’s recent National General Conference would elevate the risks to ownership of assets/companies in the economy, “on top of the severe lack of business confidence in the private sector”. He said that such an approach was likely to result in even lower-than-expected investment and. in turn, lower economic growth.
“The medium-term budget policy statement shows the dilemma of low economic growth and the lack of fiscal space to address it. This may well be the time for South Africa to consider relaxing monetary policy, in line with other commodity-dependant countries in order to spark growth,” Mr Langenhoven concluded.