Spotlight on mining and manufacturing
bdlive.co.za - Mar 9th 2015, 10:19
The production side of the economy will come into focus this week with Statistics SA’s release of mining and manufacturing data for January on Thursday.
The two sectors used to drive economic growth and job creation, but not anymore. If anything, the number of people employed in the sectors has been falling while their contribution to gross domestic product is waning.
Manufacturing, for instance, used to be the second-biggest sector of the economy, but is now the fourth. A number of global economic developments have led to a poorer performance by these sectors but some of the blame rests on local factors such as strikes and an insufficient power supply.
Global demand fell sharply due to the 2008 global recession that also saw commodity prices tumble. Commodity prices remain weak though global demand is recovering, albeit at a slow pace.
Then there are wage strikes. Last year saw major strikes in mining and manufacturing that contributed to economic growth slowing to 1.5% from 2.2% in 2013.
While there is little SA can do about global demand or growth, there is a lot it can do to revive the mining and manufacturing sectors. For one thing, industrial action can be avoided at all costs or resolved as quickly as possible.
Statistics SA data showed that manufacturing output fell 0.1% last year compared with 2013. Four of the 10 manufacturing subsectors reported lower production.
In December, manufacturing production rose 1.1% compared with December 2013 mainly due to higher production in the food and beverages division.
Economists expect the severe load shedding during January to have hit production.
The below-par performance by the mining and manufacturing sectors supports the government’s drive to increase investments in nontraditional sectors to create jobs and grow the economy. These include the so-called oceans economy, tourism, agriculture, and housing construction.
However, the poor performance of the productive sectors are not positive for confidence levels.
A business confidence index the Bureau for Economic Research is due to release on Tuesday could show that business confidence fell slightly below positive territory in the first quarter of this year.
Despite the fact that interest rates remained stable in January while the petrol price fell during that month and last month, severe load shedding and continued weakness in domestic demand will likely have weighed on confidence in the first quarter.
The index rose by five points to 51 in the fourth quarter of last year, which was the first time since early 2013 that confidence moved back into net positive territory. The increase was supported by stable interest rates and falling fuel prices at the time.From DFM Publishers (Pty) Ltd
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