Expert: Rand's volatility remains risk

Johannesburg - The weaker rand resulted in increased prices of materials used, but also protected local manufacturers from losing out to imports, said Manufacturing Circle's executive director, Coenraad Bezuidenhout.

He was commenting on the news that South Africa's Purchasing Managers' Index (PMI) dropped to 50.5 in December - the weakest in three months.

HSBC Holdings said in a statement on Monday that the December figure for the country's manufacturing operating conditions dropped from November's 51.6.

The holdings company said the rise in new business was domestically driven, as client demand from foreign markets had weakened for the second time in the past three months.

More workers were hired in the private sector in December due to increased workloads.

Bezuidenhout said the currency's volatility remained a risk to the industry's recovery.

Output levels

The bigger threat to manufacturers was the higher energy costs, particularly electricity and gas due to inefficiencies in the roll-out of infrastructure, the funding, financing and recovery of investment costs.

HSBC economist David Faulkner said earlier: "While the headline PMI remained in positive territory, the December reading was the weakest in three months, with the main downwards contribution to the index coming from broadly stagnant output levels.

"The rate of job creation accelerated to the quickest in five months, but was modest overall," HSBC said.

South Africa's manufacturing industry showed a slight improvement in December due to less production stoppages caused by labour protests and the rand's depreciation.