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Manufacturers pessimistic about future business conditions
Manufacturers pessimistic about future business conditions

Manufacturers pessimistic about future business conditions

MARKETING NEWS - Feb 17th 2015, 13:16

A higher number of producers were more pessimistic about business conditions over the next year to two years in the fourth quarter of last year compared to a year earlier. 

They cited regulatory hurdles, electricity shortages and a faltering global economy as among the reasons for their pessimism.

A Manufacturing Circle survey conducted among 64 firms also showed on Monday that the likelihood of strikes and no clarity over the government’s beneficiation strategy were also among the factors informing the downbeat outlook.

The Manufacturing Circle represents the majority of the country’s manufacturing firms.

The weak outlook translated into poor employment prospects in the sector. The survey showed that while mostly stable employment levels were expected over the current quarter (January-March), job cuts were envisaged over the next 12 months.

The Manufacturing Circle quarterly review showed that business conditions in the sector were mostly fragile or weak in the fourth quarter.

Sporadic electricity supply, low global commodity prices, subdued consumer demand, regulatory hurdles, and a volatile rand were factors that undermined business conditions over the period.

The review found that a significant share of manufactured goods was sold domestically rather than exported in the fourth quarter.

Despite the muted conditions, most respondents said they recorded increased sales supported by seasonal factors associated with higher festive season spending and extensive promotional campaigns.

Sluggish activity in the motor vehicle industry, weak mining sector performance, a decreased number of tenders awarded and increased competition from cheap imports and second-hand products affected domestic sales negatively.

Factors that positively affected export sales were a weak rand and an increased focus on the global market while those that counted against it included sluggish growth in the eurozone, elevated corruption in some African countries, and a weak Russian economy.

Manufacturers raised concerns over elevated input costs driven by above-inflation increases in electricity tariffs, labour costs, and municipal charges.

Iraj Abedian, who presented the review, said producers adopted measures to deal with high labour costs including reducing working hours, retrenchments, encouraging workers to go on early retirement, and automation.From DFM Publishers (Pty) Ltd 

Read more about: south africa | manufacturing | economy

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