Cape Town – Despite the fact that the labour environment has been relatively stable in the last quarter of 2015, it still has the potential to negatively impact the manufacturing sector’s attempts to be sustainable, according to Philippa Rodseth, executive director of the Manufacturing Circle.
South African manufacturers are still taking steps to improve competitiveness and boost economic resilience, according to a fourth quarter of 2015 Manufacturing Circle survey.
Over the quarter, respondents not only increased capacity, but also upgraded processes and facilities. About 70% of respondents said they implemented new technologies and innovations to improve their production facilities and processes.
Three quarters of respondents cited implementation of new methods towards enhancing competitiveness, including new product process innovation and efficient use of resources. To a degree, there was also increased use of technology and mechanisation.
Efforts towards enhancing productivity and competitiveness also included skills development.
Debt levels fell in more than half of surveyed manufacturers, signalling deleveraging in the face of a rising interest rate environment, according to Rodseth, executive director of the Manufacturing Circle.
These factors bode well for competitiveness, in its view, suggesting readiness for improved conditions.
The Manufacturing Circle interacts with government and other stakeholders in order to review, debate and help formulate policies which will have a positive impact on South Africa’s manufacturing base. It is made up of a number of South Africa’s leading medium to large manufacturing companies from a wide range of industries.
“Anecdotal evidence from manufacturers also indicates that the weaker rand will start to play a more significant role in improving exports, which may be reflected in the next quarter’s numbers,” Rodseth pointed out.
The survey does reveal that local manufacturers are experiencing difficult times in keeping with global trends. Large and leading economies indicated downward trends in industrial production indices towards the end of 2015, resulting in a drop in demand for commodities. This in turn impacted negatively on the export led growth of resource rich emerging markets Brazil and South Africa.
According to Rodseth, in addition to muted exports, South Africa is also showing negative trends in reduced domestic demand. The manufacturers surveyed indicated that these trends are negatively impacting the industry’s performance and are contributing to some pessimism about the future.
She, however, cautioned that rising costs will be of a key area of consideration in the sector.
“Together with an increase in imported input costs due to a weakening exchange rate, the manufacturing industry currently concerns itself with anticipated hikes in electricity prices and the rising costs of borrowing,” according to Rodseth.