Consumer crunch hits SA manufacturing

FMCG SUPPLIER NEWS

Fin24.com - Aug 12th, 09:27

Cape Town - There are indications of a degree of consolitation in the South African manufacturing sector, according to Coenraad Bezuidenhout, executive director of the Manufacturing Circle. 

The latest StatsSA figures show South African manufacturing capacity is principally under-utilised because of a lack of demand.

General indications are that this would be mostly on the back of teetering domestic demand, as exports have enjoyed support from the weaker rand.

"Whereas the May 2013 production capacity utilisation figures for big SA manufacturers - at 81.4% - is 0.1% percentage point below May of last year, it shows a 2.5 percentage point increase above the February 2013 figure," he said.

Indicators in respect of current research being undertaken by the Manufacturing Circle seem to indicate that demand from African export markets are currently enjoying a surge.

"This would suggest that international players wishing to use South Africa as a manufacturing base from which to export to African markets would serve their interests best partnering with established South African manufacturers, where their product lines and distribution networks may be complimentary," he said.

"It is notable that the manufacturing categories enjoying the highest capacity utilisation – motor vehicles, parts and accessories (at 84.8%) and electrical machinery (at 82.4%) – espectively benefit from effective industrial policy support."

The support could be either through sector-specific interventions (the Automotive Production Development Programme, for instance, or upscaled local procurement, which is gaining traction.

Weak demand is sighted as a negative impact, particularly in the clothing and textiles, wearing apparel and leather products categories.

In addition, decline in the capacity utilisation of household product categories such as radio, television and communication apparatuses (-1.2%), furniture (-1%) and fast moving consumable goods (-0.6%) all point to the declining buying power of the domestic consumer.

The biggest downturn is in the petroleum sector (-2.6%) and is ascribed to emergency and maintenance shut-downs of liquid petroleum gas facilities.From Fin24.com