South Africa's Manufacturing Sector Shows Resilience Despite Challenges

 Despite increased low cheating in the month of November, manufacturing activity here in South Africa rose at 3.6 points to 57.2 according to the EPSA purchasing manager's index. And what is also noteworthy is the improvement in the employment indicator that moved back above the 50 point mark that signals expansion. Joining us is EPSA C.I.B., a senior economist, Mielani Malulek. It's that time of the month again when we talk about manufacturing, but nonetheless, a bit of a report that we are discussing this time around. And I'm wondering if the improvement in PMI in the month of November means that low cheating didn't constrain activity or if other areas of manufacturing performed a lot better, such that they offset the blow of the constant power cuts? Yeah, I think it's a really good point you make because we did continue to see huge balls of low cheating in November as we did in October as well. But I think the one sort of major thing that we believe, I think, helped a set of foundations for this recovery that we've seen in November 50 is that we had a three-week strike in still an engineering sector in October. And I think we said, did you see the effect of that in October numbers? But that did end in late October. So I think that the still an engineering sector, which we know is a really big part of manufacturing here. So I think actually about a fifth of total manufacturing output. I think the recovery that we've seen there as well as related sectors really did set a foundation for this little bit of a rebound. But it is still quite interesting that we would actually see the PMI being so strong despite the fact that low cheating was also quite so intense. And I suspect that if some of these may be an indication that some parts of the manufacturing sector or some of the major businesses may be becoming a little bit more resilient against low cheating as we've kind of seen it. Yeah, and that is a positive thing for the economy certainly. As is the change in the employment indicator, which is a drop of good news, particularly compared to the devastating news in the national employment figures that we saw being released just yesterday. So how should we interpret the return of the employment index into expansionary territory? Is this a signal that there is a ray of hope starting to show that could potentially alleviate our jobs crisis? Yeah, it's always very encouraging, I think, to see the employment index bouncing a little bit above 50, especially in the context of the labor market data that we've been seeing here. So I think not just what we saw yesterday, but since the start of the pandemic, because when you look at the manufacturing sector in particular, we've lost just this year alone if you include the data that we've seen yesterday, nearly 90,000 jobs. If you compare with where we were at the start of the pandemic, I mean, we're down over 300,000 jobs in the manufacturing sector alone. So it's been a major job in that sector. Employment index moving above 50 is certainly quite encouraging, but I think it's just one reading. And we would want to see, I think, this being a little bit more sustained, above 50 before we can be comfortable that this is a signal that we could actually start to see a bit of a sustained cycle in terms of employment going forward. It's encouraging, but I think it's still a little bit too early to be excited about it. So we also had manufacturing figures coming out of China earlier today, which showed that part of the world's manufacturing activity actually slipped in the month of November and slipped into contractionary territory. How or what should we expect the likely implications of that to be just given the strong trade relations between our manufacturing sector and that of the Chinese? No, we would definitely should be concerned. I mean, when you look at China, it is the single biggest destination of our exports. I mean, if you look at the last couple of years, China is accounted for about 11, 12% of so I think it's export. So I think the weakening, the apparent weakening in economic activity in China should be a concern for us. And I think certainly introduces a downside risk for the recovery in the sector. Just more in over the economy, more broadly, I think particularly going into next year. Mielani, I know it's early days still, but are you expecting the new Omicron variant to have a material impact on the current picture of South Africa's manufacturing scene that we're looking at today? Yeah, I think it's all as difficult to know if you think there's still a lot that we don't know about the Omicron variant, whether it's easily much transmissible compared to the other variants that we've had, whether it causes most of the disease or not, whether the current vaccines that we have are going to be effective against. So I think that information is still critical to get because it's going to inform the policy responses that we could see from governments, not just all governments around the world as well. But I think from what we've had from the president, it does seem that for South Africa at this stage, this dance is to shift away from harsh lockdown restrictions and to focus on vaccination. I think if we do pursue that sort of strategy and the Omicron variant is not proved to be more challenging than may expect it, I think that we can expect the blow to manufacturing activity to be relatively limited if we don't get severe or harsh lockdown restrictions in the weeks of possible months to come.

Despite increased load shedding in the month of November, manufacturing activity in South Africa rose 3.6 points to 57.2, according to the Absa Purchasing Managers Index. What is also noteworthy is the improvement in the employment indicator that moved back above the 50 point mark that signals expansion. Miyelani Maluleke, Economist at ABSA Corporate & Investment Banking joins CNBC Africa for more.

SA’s Absa PMI records increase in November 

Despite increased load shedding in the month of November, manufacturing activity in South Africa rose 3.6 points to 57.2, according to the Absa Purchasing Managers Index. 

SA’s Absa PMI records increase in November

Related Videos

Trending Tokens

News Tips

Advertise With Us

SA’s Absa PMI records increase in November

SIGN UP FOR OUR NEWSLETTER

DAILY UPDATE

Related Videos

Trending Tokens

News Tips

Advertise With Us

Newsletters