The sec­tor is go­ing through a fun­da­men­tal struc­tural ad­just­ment, and not just a cycli­cal cor­rec­tion

CityPress - - Business -

and reached its peak in 2007, and the down­swing has al­ready lasted seven years. This means there may be another 10 to even 20 years of de­pressed mar­kets left.

“Un­planned elec­tric­ity out­ages have risen from 1% in 2005 to 15% to­day, and these can cost the sec­tor pro­duc­tion losses of up to 25%,” he adds.

“The SA Re­serve Bank cal­cu­lated that elec­tric­ity short­falls can cost the coun­try 0.5 per­cent­age points of gross do­mes­tic prod­uct growth, which means 25% lower growth.

“Most energy-in­ten­sive users are still con­sum­ing be­low their 2008 lev­els, and the op­por­tu­nity costs of in­stalling emer­gency and standby ca­pac­ity is a stag­ger­ing 35% of all in­vest­ment in the sec­tor in 2013.”

Not­ing that it took 10 years for energy sup­plies to reach this con­strained point, he pre­dicts that “cur­rent in­sta­bil­ity is likely to last for two to three years”.

Lan­gen­hoven says only the ve­hi­cle-man­u­fac­tur­ing sec­tor shows growth thanks to ex­ports, while both the min­ing and con­struc­tion sec­tors are limp­ing along at pedes­trian growth rates, if at all.

“The con­se­quences of the rise of China and In­dia, as well as the struc­tural ad­just­ments tak­ing place in those economies, will be sig­nif­i­cant,” he ex­plains.

“There are mas­sive sur­pluses gen­er­ated in those mar­kets, which find their way on to the world mar­ket.

“The cur­rent re­bal­anc­ing tak­ing place will shift their in­put-de­mand pat­terns down­ward per­ma­nently. De­mand out of Africa could de­cline in sync, ow­ing to its de­pen­dence on Chi­nese de­mand for its com­modi­ties for its own growth.

“The lo­co­mo­tive power of the Chi­nese econ­omy of the past 20 years will not be re­peated. The met­als and en­gi­neer­ing sec­tor – with its sym­bi­otic re­la­tion­ship with the auto, min­ing and con­struc­tion in­dus­tries – is go­ing through a struc­tural cor­rec­tion on its de­vel­op­ment tra­jec­tory.

“In­no­va­tion in terms of busi­ness so­lu­tions, bet­ter so­cial co­he­sion be­tween busi­ness and labour, and pol­icy ad­just­ments from gov­ern­ment are ur­gently needed to pre­vent the sec­tor from with­er­ing away.”

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