Manufacturing sector confidence falls on policy uncertainty
By Sunita Menon - Mar 28th 2017, 13:53
Policy uncertainty continues to affect the manufacturing sector, rattling business confidence.
A Bureau for Economic Research (BER) survey released on Monday showed business confidence in the sector declined to 28 index points in the first quarter of 2017.
The survey said 72% of its respondents were despondent. The index has remained pessimistically below 50 points since 2011. Anything above 50 shows a vibrant sector. Manufacturing Circle, an organisation representing SA’s leading medium to large manufacturing firms from a wide range of industries, expects expansion in manufacturing investment for the first quarter.
Responding to the survey, Manufacturing Circle executive director Philippa Rodseth said: "Our quarter four 2016 Manufacturing Circle Investment Tracker report anticipated expansion in manufacturing investment for quarter one 2017, which is borne out by the [manufacturing production results]." She said the manufacturing sector would only have sustained growth in the long term by focusing on supply-side challenges and stimulating demand-side growth.
"Manufacturers need to be encouraged to invest on a long-term basis. But there is not a quick solution and we require a collaborative effort by both the public and private sector to identify and implement specific projects and opportunities in an environment of policy certainty and alignment," Rodseth said.
Across the board, business confidence on the supply side remained below 50 in February. Economists said policy and political uncertainty remained a concern for the manufacturing and mining sectors.
"There’s uncertainty in the political sphere and 75% of manufacturers said the political environment wasn’t conducive to investment," BNP Paribas economist Jeffrey Schultz said.
"We need a stable political environment and stable policy environment. There’s no sign that there’s more clarity on the Mineral and Petroleum Resources Development Act or land expropriation. We need to see an improvement in this before we see a meaningful improvement in the industry."
FNB senior economic analyst Jason Muscat said: "Inevitably there is a level of uncertainty. We should have some clarity on the mining bill this week. Mining uncertainty spills over into the manufacturing sector."
Output from manufacturing, which accounts for about an eighth of SA’s economy, pointed to a mild recovery, with manufacturing production increasing 0.8% in January compared with January 2016.
"The investment outlook remained depressed but it’s not too premature to think there will be an improvement."
"A farming and commodity improvement will see an improvement in manufacturing. We’ve seen significant improvements but [political] noise in the system creates an uncertain backdrop for both foreign investors and domestic investors," Muscat said.© BusinessLIVE MMXVII
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