Manufacturing Circle optimistic about prospects of factories

Despite the Absa purchasing managers’ index (PMI) spending six months in contractionary territory, the Manufacturing Circle is adamant that manufacturing is SA’s greatest opportunity for job-rich growth.

The seasonally adjusted PMI, which measures activity in manufacturing, rose to 48.6 index points in November from 47.8 in October. While a score above 50 indicates an expanding manufacturing sector, the PMI nevertheless rose to its highest level in six months.

The breakdown of the survey showed that the improvement in the headline index was driven by a pickup in current activity, but that firms remain pessimistic about the outlook. The business activity component rose to a six-month high of 48.0, yet the expected future conditions component fell back to a three-month low of 50.0.

Manufacturing Circle executive director Philippa Rodseth said: “We [need to] continue our sustained efforts to achieve a competitive manufacturing environment, achieve a supportive international trade environment with particular reference to unfairly incentivised imports, and buy more locally manufactured product.”

Last month the Circle launched its Map to a Million initiative to create one million direct jobs in manufacturing through industry interventions and government support to increase investment.

“Performance of the sector is still erratic and the manufacturing environment remains fragile. We need to actively engage in and support the initiatives mentioned so that we begin to see sustained positive growth on a sustainable and long-term basis,” said Rodseth.

Manufacturing Circle chairman Andre de Ruyter said government interventions are the key to slowing down the rate of job losses and deindustrialisation in the sector.

“If manufacturing can expand to 30% of GDP, between 800,000 and 1.1-million direct jobs can be created, with five to eight times that in indirect jobs,” De Ruyter said.

NKC economist Elize Kruger said: “Looking ahead, we do not expect to see a major improvement in business conditions in the manufacturing sector during the first half of 2018. However, there are signs of a modest domestic economic recovery, which in combination with improving global economic conditions could be somewhat of a positive offsetting factor.”

Capital Economics’ William Jackson said the sector was expected to register positive annual growth in the fourth quarter. “Based on the PMI survey, we think the recent slump in the manufacturing sector … has continued to ease in the fourth quarter,” he said.