In December 2023, South Africa’s manufacturing sector experienced a modest uptick, albeit with minimal impact on the country’s Gross Domestic Product (GDP) for the fourth quarter, according to data released by StatsSA. The sluggish growth, marked by a mere 0.7% year-on-year increase, was primarily attributed to ongoing challenges in the energy sector.
Economist Lara Hodes from Investec emphasized the persistent struggle posed by the country’s energy crisis, despite some alleviation in load shedding during December. “The electricity supply predicament remains a significant challenge for the energy-intensive manufacturing sector and the economy as a whole,” stated Hodes.
On a quarter-on-quarter seasonally adjusted basis, manufacturing output showed marginal growth, hovering at 0.1%, which is expected to contribute negligibly to the overall GDP reading for the quarter.
The performance fell notably short of expectations, with manufacturing production missing the anticipated 2.7% year-on-year lift. Among the notable contributors to the modest growth were:
Moreover, seasonally adjusted manufacturing production saw a 1.7% decline in December compared to the previous month, according to StatsSA data.
In terms of manufacturing sales, there was a 1.3% increase in December 2023 compared to November 2023, following month-on-month changes of +1.7% in November 2023 and -0.6% in October 2023. Notably, five out of ten categories in the manufacturing basket witnessed annual increases in December.
Yearly manufacturing statistics revealed a 0.4% increase compared to 2022, a slightly better performance than the 0.3% annual decline witnessed in the preceding year. Key contributors to this growth included basic iron and steel, non-ferrous metal products, motor vehicles, parts and accessories, and wood products.
Despite these marginal gains, South Africa’s manufacturing sector continues to face challenges due to a subdued global manufacturing environment, which has undermined export potential. Hodes highlighted the latest Purchasing Managers’ Index (PMI) for January, indicating a persistently depressed manufacturing sector at the beginning of 2024, with declines observed in both business activity and new sales orders indices.
In summary, while South Africa’s manufacturing sector showed minimal growth in December, it remains vulnerable to external and internal challenges, necessitating concerted efforts to stimulate sustainable growth and resilience.