SEIFSA Welcomes Rebound In Metals And Engineering Sector

The latest preliminary seasonally-adjusted production data published by Statistics South Africa (Stats SA) reflect an increase in output in the metals and engineering (M&E) sector, in line with the broader manufacturing sector which increased by 2.5% in January 2018 when compared with January 2017.

Dr Michael Ade, Chief Economist of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).
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The data indicated that production in the M&E sub-components increased by 5.1 percentage points in January 2018 on a year-on-year basis when compared to January 2017, and by 2.1 percentage points in January 2018 on a month-to-month basis when compared to December 2017.

“The output performance of the M&E cluster is welcomed and the expectation is for the positive growth path to continue, as all stakeholders within the cluster and the broader manufacturing sector step up efforts to boost overall production. The performance of the M&E cluster generally augurs well for the broader domestic economy and hopefully will significantly boost the real Gross Domestic Product (GDP) for quarter 1 of 2018,” Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Chief Economist Dr Michael Ade commented.

Ade said although the past nine months to the end of quarter four 2017 have seen the real GDP recover from the contraction that marked the previous nine months, challenges to the supply side of the economy and especially in industrial production still prevailed. He said the benefits of a slight up-tick in production in the M&E cluster in 2017 was still not felt by local companies due to prevailing economic challenges, with the production trend still remaining variable and being largely pro-cyclical.

“It is clear that while the recent political forces of change have the potential to improve on perception, credit worthiness and the output stance of the domestic economy, there is still more work to be done in all industrial sectors in general and in the manufacturing sector in particular. The contribution of the manufacturing sector to the broader economy has declined over the years, from roughly a 24% contribution to GDP in the 1990s to a low 12.29% in 2017, with dire consequences on jobs levels,” Ade said.

He said that, moreover, the variability in output in the manufacturing sector – including its M&E sub-components in the years after the 2014 crisis – was still evident, underscoring the need to continue exploring ways of reviving the fortunes of the sector.

“Clearly, there is still more work to be done and all stakeholders have to pool resources together to ensure a return to the glorious growth levels last recorded in the early 1990s. Accordingly, a continuous rebound in production is needed if the manufacturing sector is to regain its position as the main contributor to the broader economy.

“This objective is possible, given the improvement in business confidence and sentiments since the beginning of this year, against the backdrop of a domestic political shift,” Ade concluded.

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