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SA's manufacturing industry going nowhere slowly
Date: 16 October 2018 Category: Economics |
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South Africa's manufacturing industry has been dying a slow painful death over the years, as manufacturing plants and capacity in South Africa shuts down, as more and more companies look to import products at a cheaper price from countries such as China, Taiwan, Germany, India, United States etc.
When looking at the latest index of volume of goods produced and compare it to the index of the value of produced goods sold, one can clearly see that both these metrics are basically going sideways to down, which is just another sign that there is no growth in the manufacturing industry in South Africa. |
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The amount of goods manufactured in South Africa not really growing?
The line chart below shows two lines. One represents the volume of goods produced, expressed as an index. With the Index Value being 100 for the year 2015. The other line represents the value of produced goods sold in South Africa (after stripping out inflation). And as they show, they ar very closely correlated, but unfortunately there is no real growth in the industry taking place, be it in terms of the volume of goods produced in South Africa, or the value of the goods sold that were produced in South Africa.
Essentially what the graphic is showing is that since 2015, South Africa only managed to produce 2.2% more by August 2018, compared to the average volume of goods produced during the year 2015, while the value of sales of the goods produced is only 2.43% more by August 2018, than it was during 2015.
So some would argue at least there was still growth. Well yes, but when takes the population growth into account, which leads to more goods being demanded by a ever increasing population, one realises that the slow growth in the volume of goods produced in South Africa cannot keep up with the population growth, which means the goods consumed and used in South Africa has to come from somewhere else. And the only logical conclusion one can draw is that more manufactured goods are being imported into South Africa. South Africa's population grew by 4.8% (more than double the growth of manufacturing output) from middle 2015 to middle 2018.
As we showed in a article earlier this year, the value of imports over domestically produced goods is far greater in South Africa than say in the United States for example. Which shows a country such as the USA has greater manufacturing capabilities and capacity than South Africa. For that article: Click here
Part of the problem is ESKOM, as without a reliable power source, no manufacturer in their right mind would look to expand or invest in South Africa if a reliable, cheap power source cannot be supplied. Lack of skilled labour and know how when it comes to the manufacture of complex equipment and machinery that is currently being imported into South Africa is another factor.
Profit driven firms looking to push up profit margins would rather import than support local manufacturers. Government could address this by providing incentives to firms who support local manufacturers. This could assist in stopping the number of jobs that are being lost in the manufacturing industry in South Africa each year.
A lot to do to fix South Africa's manufacturing industry, and not a lot of time to do it in. And sadly the ruling party is to busy dealing with corruption scandal after corruption scandal and state capture issues to look at ways of saving jobs and stimulating the local economy by putting measures in place to protect local industries.
For more on South Africa's manufacturing industry, see our SA manufacturing industry page:
SA manufacturing industry
So some would argue at least there was still growth. Well yes, but when takes the population growth into account, which leads to more goods being demanded by a ever increasing population, one realises that the slow growth in the volume of goods produced in South Africa cannot keep up with the population growth, which means the goods consumed and used in South Africa has to come from somewhere else. And the only logical conclusion one can draw is that more manufactured goods are being imported into South Africa. South Africa's population grew by 4.8% (more than double the growth of manufacturing output) from middle 2015 to middle 2018.
As we showed in a article earlier this year, the value of imports over domestically produced goods is far greater in South Africa than say in the United States for example. Which shows a country such as the USA has greater manufacturing capabilities and capacity than South Africa. For that article: Click here
Part of the problem is ESKOM, as without a reliable power source, no manufacturer in their right mind would look to expand or invest in South Africa if a reliable, cheap power source cannot be supplied. Lack of skilled labour and know how when it comes to the manufacture of complex equipment and machinery that is currently being imported into South Africa is another factor.
Profit driven firms looking to push up profit margins would rather import than support local manufacturers. Government could address this by providing incentives to firms who support local manufacturers. This could assist in stopping the number of jobs that are being lost in the manufacturing industry in South Africa each year.
A lot to do to fix South Africa's manufacturing industry, and not a lot of time to do it in. And sadly the ruling party is to busy dealing with corruption scandal after corruption scandal and state capture issues to look at ways of saving jobs and stimulating the local economy by putting measures in place to protect local industries.
For more on South Africa's manufacturing industry, see our SA manufacturing industry page:
SA manufacturing industry