Raw material shortages impede production ability
GLOBAL restrictions implemented to curb the spread of Covid-19 have had a direct effect on manufacturing supply chains, with constraints still evident across South Africa’s manufacturing sector a year after the country first went into a hard lockdown, a first-quarter survey released this week shows.
For the second quarter in a row, manufacturers highlighted raw material shortages as a serious impediment to activities, the survey sponsored by Absa and conducted by the Bureau for Economic Research showed.
The results of the survey, which covered about 700 business people, between January 18 and March 1, were published on Tuesday.
“South African manufacturers are reporting issues in the supply chain that are resulting in raw material shortage constraints negatively affecting their production processes,” said Justin Schmidt, the head of manufacturing at Absa.
“Currently, a major problem globally appears to be the supply of shipping containers and vessels across routes, including to and from South Africa. Whilst manufacturers remain hopeful that this will be resolved within the quarter, the risk of successive Covid-19 waves around the globe and further lockdown restrictions is a major concern.”
Despite previous signals that the manufacturing sector’s output recovery could receive a boost this year if higher demand levels were sustained and producers could restock inventory to meet forward-looking demand, the first-quarter survey showed output continued to lag demand.
“Many manufacturers close during December and January, and, as such, there is often a dip in production volumes over this period,” said Schmidt, noting that this year load shedding and adjusted lockdown level 3, which included a ban on alcohol, had been a major drag on production.
February’s data would provide a good indication of the sector’s production recovery, with the sector appearing to have gained some lost ground as indicated by the Absa purchasing managers’ index, which increased for a second consecutive month in February, said Schmidt.
“External shocks such as the reintroduction of lockdown restrictions to mitigate the impact of a third wave of Covid-19 cases and the resurgence of load shedding, which will likely remain a factor throughout 2021, pose a risk to the recovery,” he said.