Categories: Business NewsNews
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2023-12-06 12:08 PM

South African Manufacturing Faces Turbulence Amidst Port Woes

  • Manufacturing Sector Recovery: Despite logistical challenges at South African ports, the manufacturing sector experienced a slight uptick in November according to the Absa Purchasing Managers’ Index (PMI). Key indices like business activity and new sales orders showed signs of improvement, hinting at a slow but potential recovery in the industry.
  • Persistent Logistics Concerns: Delays at South African ports continue to disrupt the timely delivery of supplies, impacting production due to input unavailability. The extended disruptions are expected to linger, potentially escalating production costs and affecting export operations, presenting a challenge to the sector's growth.
  • Mixed Outlook with Cost Relief: While future business conditions are anticipated to worsen in the coming months, there's a silver lining in decreasing purchasing prices. The downward trend in pricing offers relief to manufacturers, especially after earlier pressures due to a weakened rand exchange rate. Additionally, the expected reduction in domestic fuel prices could alleviate financial burdens for certain manufacturers reliant on diesel generators during load shedding periods.
By Miriam Matoma

As South Africa grapples with logistical challenges plaguing its ports, the manufacturing sector anticipates a glimmer of hope post a tumultuous 2023. Despite the prevailing crisis, a surge in the latest Absa Purchasing Managers’ Index (PMI) by 2.8 index points to 48.2 in November has sparked optimism, marking the first upswing in two months, albeit still within negative territory.

The PMI’s surge signals a marginal slowdown in the decline of business activity and new sales orders indices, hinting at a gradual but steady recovery in the industry. Notably, the business activity index escalated by 5.7 points to 46, while new sales orders recorded an increase of 6.9 points in November, reaching 46.6 points.

Commenting on these improvements, the Bureau for Economic Research (BER) cautiously welcomed the signs of revival in demand but expressed concerns over certain aspects highlighted in the survey results. Despite increased activity, the employment index stagnated at a low 41.1 index points, indicating a lack of significant job creation within the sector.

Furthermore, the persistent delays at South African ports have exacerbated the slow delivery of supplies, causing disruptions in production due to input unavailability. Respondents fear these challenges could potentially escalate production costs while also impacting export operations.

“The extended disruptions at the harbours are worrisome, and it may take several months for normalcy to return. This lingering impact could continue to impede the sector’s growth,” highlighted the BER.

Projections for future business conditions paint a somber picture, with expectations dipping to 41 points in November, marking the lowest level since the stringent Covid-19 lockdowns in 2020. Purchasing managers foresee a challenging business landscape in the forthcoming six months.

Apart from logistical woes, the recent escalation in load shedding has further dampened forward-looking sentiments. However, a silver lining emerges on the cost front, with the purchasing price index maintaining a downward trajectory, hitting 61.5 points in November.

“The sustained drop in purchasing prices is a positive trend, offering relief to manufacturers following earlier pressures amid a weakened rand exchange rate earlier in the year,” noted the BER.

Furthermore, the anticipated reduction in domestic fuel prices is expected to alleviate some financial burden, particularly for manufacturers reliant on diesel generators during escalated load shedding stages.

Index figures for key metrics in recent months illustrate the industry’s fluctuating landscape:

  • Business Activity: SEP (43.1) → OCT (40.3) → NOV (46.0)
  • New Sales Orders: SEP (38.1) → OCT (39.7) → NOV (46.6)
  • Employment: SEP (44.2) → OCT (41.0) → NOV (41.1)
  • Inventories: SEP (45.1) → OCT (44.8) → NOV (42.8)
  • Supplier Deliveries: SEP (60.5) → OCT (61.0) → NOV (64.6)
  • Purchasing Prices: SEP (67.2) → OCT (62.9) → NOV (61.5) (*Inverted indices)

Amidst these challenges, South African manufacturers navigate through a complex landscape, striving for resilience and stability in the face of ongoing obstacles. The industry’s recovery hinges on addressing logistical bottlenecks and fostering an environment conducive to sustainable growth.

As the nation continues its efforts to overcome these hurdles, stakeholders eagerly await signs of sustained improvement, hoping for a brighter and more prosperous future for South Africa’s manufacturing sector.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: miriam@rateweb.co.za Twitter: @MatomaMiriam