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Manufacturing sector in a crisis

Nov 28 2012 16:36 Sapa

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Johannesburg - The South African manufacturing sector is in a crisis which requires changes in the country's policies, the Manufacturing Circle said on Wednesday.

"The sector has lost 300 000 jobs since 2010. The recession has been biting; we have also had a recession in the construction sector which has hit us severely, and then the flood of imports," chairperson Stewart Jennings said in Johannesburg.

"Since 2010, we've seen an enormous flood of imports from China which affected our businesses. At the same time, our exports have been reduced because of the recession in Europe."

Jennings also attributed the loss of jobs to electricity price increases.

"We've had a 200% increase in electricity in five years. No manufacturer can... [deal with] a huge increase like that when your prices are actually coming down because of the rand. Most of the manufacturers use a significant portion of electricity."

He said Chinese imports came at over 40% less than the local market price.

"Some of the prices are ridiculous. They are below the raw material costs. It just cannot be done [competing with such prices]."

Jennings was briefing reporters on a meeting between manufacturers and the African National Congress economic transformation committee.

They discussed ways of growing the sector and creating new jobs, ahead of the ANC's national conference in Mangaung in December.

In the past, the manufacturing sector made-up 22% of GDP, but it has shrunk to "barely" 15% of Gross Domestic Product, said Jennings.

The government had to do something to curb the impact of Chinese imports on the manufacturing sector.

"First thing, our government has to put some duties on [imports], engage with China as part of Brics [the Brazil, India, China and South Africa group of developing nations] and say we are a developing economy.

"The most important part of our economy is employment, so please stop these cheap imports into the country," Jennings said.

"We have to do something, otherwise we are going to continue to have more and more unemployment."

Another change in the South African economy was that people were buying cars more than taking out mortgages.

At least 72% of the vehicles sold in the domestic market were imported. This did not improve the vehicle manufacturing sector, he said.

"Some of the orders for vehicles produced in South Africa have been cancelled because of the recession in Europe."
manufacturing sector
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