Industry Research: Manufacturing Sector

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Industry Research: Manufacturing Sector
  • Industry Research: Manufacturing Sector
  • Year : Feb 2020
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Summary

Manufacturing production figures released by Stats SA paint a bleak picture for the local industry. Since June 2019, there has been a sustained contraction in monthly manufacturing volumes. From a fairly solid 1.5% increase to May 2019, manufacturing volumes had contracted by 0.9% for the full year 2019. Of greatest concern, manufacturing volumes declined by a substantial 5.9% year-on-year in December 2019, following the return of load shedding. As all indications are that landholding will continue over the coming months, GCR would expect to see an even steeper decline in manufacturing output in 2020. 

Additional Information

As manufacturing entities require a consistently large supply of electricity, they do not have the luxury of exploring alternative sources. In many instances electricity efficiency initiatives have already been implemented in previous years and further reductions in usage would be at the expense of production volumes. Aside from this, consumer pressure has reduced demand for products across the price range, narrowing economies of scale and limited pricing power. This combination of both cost and demand pressures is one of the key credit risks facing the South African economy in the short to medium term.

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