THE MANUFACTURING sector is expected to continue ramping-up its production capacity after showing significant improvement in May from last year’s record plunge during the level 5 lockdown.
However, the recent civil unrest that disrupted supply chains in July could hamper the manufacturing capacity and have a prolonged effect on the industry well into 2022.
Data from Statistics South Africa (StatsSA) yesterday showed that the utilisation of production capacity by large manufacturers rose to 78.6 percent in May from 59.8 percent a year ago.
This was an increase of 18.8 percentage points as all of the manufacturing divisions experienced increases in utilisation of production capacity during the month.
The May print was also higher than February’s reading of 76.3 percent as manufacturers used more of their available resources to produce goods.
The largest increases were recorded in the furniture, glass, motor equipment, wood, publishing, textiles, clothing, leather and footwear and electrical machinery categories.
StatsSA said wood products, food and beverages, communication apparatus and professional equipment, and motor vehicles divisions all recorded rates of utilisation of production capacity above 80 percent in May.
Investec chief economist Annabel Bishop said the second and third quarters’ of the year typically see improvement in manufacturing utilisation.
Bishop said the month of January usually sees both a slow return to work and start to production for the year after the festive spend, while retailers and wholesalers build up inventory before the holidays, then run it down in the January/February sales.
“Today’s reading is still well below the 83.4 percent average during the Thabo Mbeki period of good governance in the bulk of the 2000s, which saw the fastest sustained period of growth,” she said.
“However, South Africa’s third quarter will see substantial damage to its manufacturing capacity from July’s violent riots, and this will have a lengthy effect over 2022 as well, with rebuilding of infrastructure yet to commence generally.”
KwaZulu-Natal and Gauteng provinces account for more than half of South Africa’s gross domestic product, and the toll of the unrest is yet to be fully felt.
Bishop said the country’s economic recovery package and a wide range of fiscal measures, including tax exemptions in distressed sectors, should help afflicted small businesses as well as the poor.
The Gauteng provincial government has established a multimillion-rand fund to help businesses affected by the recent looting and the Covid-19 pandemic to get back on their feet.
“Gauteng’s economic recovery plan includes some focus on these as well as identifying the need to bolster business confidence and funding for re-building, allocating R100 million to rebuilding township development, including township industrialisation, special economic zones as well as backyard shack upgrades,” she said.
siphelele.dludla@inl.co.za
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