South Africa’s manufacturing sector is in decline and most of the decline has been attributed to Eskom’s load shedding which impacts production.
Data from Statistics South Africa also shows that manufacturing production has fallen for six consecutive months in November.
Production output slumped 3.6% in November 2019, following a 0.8% year-on-year fall in October.
Stats SA says the main decreases were recorded in production of wood and wood products, paper, publishing and printing, followed by textiles.
However, food and beverages were the only categories that recorded positive growth.
Stats SA’s Juan-Pierre Terblanche says, “Textile and clothing experienced its 12 consecutive months of decline, falling by 13.3%. … Six other divisions experienced slower growth most noticeable furniture and other manufacturing divisions which recorded a 9.2% drop. There was one division with positive growth and that was the food and beverages up 1.3% in November.”
The Manufacturing Purchase Managers Index which measures activity in the sector has declined to 47.1 index points. This means there’s contraction in the manufacturing sector.
Anything below 50 index points signals a decline and possibly a recession.
Jannie Rossouw is Interim Head of Wits Business School. “The PMI index of course under 50, meaning it’s in a decline. If it is above 50, it means there’s some growth and it’s clear that the economy is going into contraction. Amongst others because of the problems we see at Eskom. We really need to get into grips with the Eskom problem very urgently to see any economic growth in South Africa going forward.”
There are growing fears that the ailing economy could fall into recession as some of the key sectors of the economy have been underperforming in the fourth quarter of last year.
The unpredictability of power supply will continue to compromise the manufacturing sector by reducing production output from local firms.