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Manufacturing growth declines in October, attributed to rolling blackouts

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Statistics South Africa says growth in manufacturing production declined in October to one percent from 2.9 percent in September.

The slowing growth in manufacturing numbers is attributed mostly to rolling blackouts.

Not a single major sub-sector managed to increase output with food and beverages down 12 percent and vehicles and parts down almost 20 percent on a month-on-month basis.

However positive contributors to output were from basic iron and steel, metal products and machinery.

Miyelani Maluleke is the senior economist at ABSA says, “The October manufacturing numbers came as a big downside surprise. Consensus was for growth of 4.5 percent but we only ended up with one percent and that was also actually down from 2.9 percent in September. Pretty disappointing for sure, but I think especially now as we deal with this big bout of load shedding, the number does come as a very important reminder of some of the ongoing costs of the past tragedies that we are experiencing.”

Financial stability at risk

The South African Reserve Bank (SARB) says rolling blackouts are posing a risk to the financial stability of the country.

The Bank has added power cuts as one of the main risks to the country’s financial sector in its recent Financial Stability report.

Head of the Financial Stability Department of the South African Reserve Bank Nicola Brink says power cuts are a concern and is putting strain on an already weak economy. Eskom is under pressure to restore electricity supply as it implemented yet another Stage six round of rolling blackouts.

The Reserve Bank says rolling blackouts are starting to have a negative impact on the profits of small businesses, who risk defaulting on their loans.

Government relies on the banking sector to raise capital through its bonds. Local banks hold a lion’s share of government bonds.

Brink says, “A key concern is the strain that load shedding puts on already weak economic growth. And the viability of corporates, in particular SMMEs. Corporate liquidations continue to increase by 11.8 percent in the year to September 2022. Combined with high interest rates and debt servicing costs, this affects their ability to service debt. So far default indicators of banks are not yet raising financial stability concerns.”

Meanwhile, the constant power outages during the festive season are a cause of concern for business owners. They are worried about their products, employees and losing their businesses.

These business owners were hoping to cash in this festive season:

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