Johannesburg - Sales of manufactured goods rose in the first quarter of the year although the strong rand was worrying the sector, the Manufacturing Circle said on Friday.
"The relatively strong performance of the manufacturing sector made a significant contribution towards overall economic growth in quarter one 2011," it said.
The Manufacturing Circle is a group of 26 major manufacturing companies including SABMiller [JSE:SAB]
, ArcelorMittal SA [JSE:ACL]
, Pretoria Portland Cement [JSE:PPC]
, Hulamin [JSE:HLM]
, Mondi, BMW and Altron.
A member survey found that the sales increase in the first quarter was driven by the continued recovery in the global economy, higher commodity prices and stronger domestic demand.
The percentage of members surveyed experiencing growth in sales volumes increased to 63%, from the previous quarter's 60%.
However, the number experiencing growth in value declined to 75%, from 80% in the previous quarter.
"Despite robust manufacturing production figures, the persistently strong and volatile rand remains a major concern for manufacturers, eroding margins on exports and reducing competitiveness," said Stewart Jennings, Manufacturing Circle chairperson and PG Group CEO.
"Local manufacturers also find it difficult to compete in the domestic market due to increased competition from cheap imported products."
Last month, the Manufacturing Circle held talks with Finance Minister Pravin Gordhan to discuss interventions to weaken the rand.
Manufacturing confidence was down in the first quarter, with no CEOs surveyed saying they would characterise their current business environment as strong.
In the fourth quarter of 2010, 1% of respondents did so.
Those CEOs who felt that the current outlook for domestic manufacturing was weak increased from 30% in the previous quarter to 44%.
Employment levels remained the same over the quarters.
Iraj Abedian, economist and adviser to the Manufacturing Circle, said the manufacturing sector was among the top four economic sectors that generate wealth and create decent jobs in South Africa.
"The promotion and expansion of the sector needs to be a top national priority and government intervention is required to provide the correct incentives to boost the productive capacity of these industries," he said.
"These incentives should focus on achieving a relatively stable and more accommodative interest rate environment, providing specialised export support measures and achieving a realistic exchange rate that will keep the manufacturing sector at a competitive edge globally."