Overall investment in the manufacturing sector continued to expand in the second quarter of 2018. This is according to the Manufacturing Circle Investment Tracker, which tracks the trends in investments within the sector, on a quarterly basis. The Manufacturing Circle Investment Tracker follows actual spending patterns of a sample of manufacturing across all of the sub-sectors in the industry.
The tracker indicates expanding investment in human capital, maintenance, replacements and upgrades as well as plant and equipment for expansion. “Contrary to what one would expect in a very negative environment, we saw an increase, a positive trend in 7 of the 8 categories that we measure. That certainly has been a pleasant surprise; it shows that manufacturing is resilient, that our members are still prepared to back the country. So there’s this narrative that business is on an investment strike but our data clearly indicates that that is not the case, that we are continuing to invest,” says Chairperson of the Manufacturing Circle Andre de Ruyter.
Through a survey, 65 % of the Manufacturing Circle members reported that their investment remained within their budget range in the second quarter of 2018. The survey further indicates that 80 % of the members reported that capital spending on property and human capital remained within their allocated budget. “It measures member activity in the manufacturing sector across eight different segments and it’s a very good indicator of whether or not manufacturers are positive or whether they are experiencing pressure. Due to the fact that it is geographically represented across the entire country, it allows us to get a very good view of what the sentiment is in terms of actual actions that manufacturers are taking in the economy.”
De Ruyter says increased populist policy adoptions by the US has a negative effect on the manufacturing sector and poses a risk to South Africa and US trade relations.
“For example we make the stainless steel nuts that go on American four-by-fours. One of our members makes aluminium components that go into Tesla motor vehicles, so the argument that the US government has been proposing that the importation of these items from South Africa creates some sort of national security risk, we are really struggling to understand.”
A hundred and five-thousand jobs were lost in the manufacturing sector in the second quarter of the year. This makes the sector one of the biggest contributors to the increase in the unemployment rate in the second quarter of 2018.