Fin24

Manufacturing sector stable

2012-05-18 16:31

Johannesburg - Confidence in the manufacturing sector remained stable in the first quarter of the year, the Manufacturing Circle said on Friday.

"Manufacturing production in the first quarter of 2012 grew by 1.9% quarter-on-quarter, compared to 1% in the fourth quarter of 2011," spokesperson Coenraad Bezuidenhout said in a statement.

Respondents to the Manufacturing Circle's quarterly survey were optimistic in the light of government's infrastructure investment drive, but said various risks dampened their confidence.

These risks included a deficiency in water and electricity supply and scarcity of raw materials like good grade coal and steel.

Soaring transport and energy costs, and uncompetitive labour costs coupled with an appreciating rand were also factors.

Respondents were concerned about uncertainty in the global economy and about original equipment manufacturers leaving South Africa due to a lack of confidence in the automotive production and development programme.

During the first quarter, the survey found the value of domestic and international sales had deteriorated.

"Furthermore, the slowdown in the global economy during the rest of the year and the effect of cheap manufactured goods on the local manufacturing sector are expected to stifle manufacturing production," Bezuidenhout said.

Manufacturing jobs were disappointing in the first quarter of the year, with the sector posting the second highest number of job losses in the South African economy.

The rest of the year was expected to be tough.

"A recession in the eurozone, coupled with a possible hard landing in China, will negatively affect the domestic economy, mainly through the trade channel.

"Consequently, the manufacturing value added is predicted to shrink by about 0.7% during 2012."

Bezuidenhout predicted a rebound in 2013 as the global economy recovered, government's infrastructure drive was implemented, and the manufacturing competitiveness enhancement programme kicked in.

"On the other hand, the rand exchange rate will continue to pose downside risks to manufacturing exports going forward," he said.

The survey contains the views of South African CEOs of manufacturing companies with revenues ranging from R300m to over R10bn.