Absa Q2’24 manufacturers’ confidence improves

Manufacturers in South Africa are showing signs of improved confidence in the second quarter of 2024, marking a positive shift after several quarters of losses. According to Justin Schmidt, Executive for the Manufacturing Sector at Absa Relationship Banking, the latest index reflects a notable uptick in sentiment within the industry. Schmidt points out that while the long-term average remains at 36 out of 100, the recent improvements are a welcomed development for the sector. One of the key drivers behind the boost in confidence has been the reduction in load shedding in recent months. The decrease in power outages has been instrumental in restoring faith in the local manufacturing sector. Additionally, expectations for increased exports, pricing improvements, and other positive indicators have contributed to the overall improvement in sentiment. Despite the encouraging outlook, there are still challenges that manufacturers are facing. Schmidt highlights the impact of cheaper imports and RAND volatility as factors that could potentially hinder long-term growth. He mentions specific concerns in transport manufacturing, where supply chain issues have caused a dip in confidence. However, Schmidt points out that overall, the industry is seeing positive trends in raw materials, inventory, and forward-looking expectations. While challenges such as port constraints persist, manufacturers are showing a willingness to reinvest in their businesses. Schmidt emphasizes the importance of stable power supply in sustaining this positive momentum. Another area of focus is the regional performance of manufacturing, particularly in the Western Cape and KwaZulu-Natal (KZN). Schmidt notes a surge in growth in these areas, driven by increased exports and higher demand. While recent storms in KZN have raised concerns about potential disruptions, Schmidt remains optimistic about the region's ability to recover swiftly. Schmidt also underscores the significance of uninterrupted power supply in driving further growth for the industry. He highlights the impact of private sector investment in energy supply as a key mitigating factor against the disruptions caused by load shedding. With a sustained lack of power outages, manufacturers are more inclined to reinvest in their operations, leading to increased utilisation and confidence. In conclusion, the improved confidence among manufacturers in South Africa signals a positive trend for the industry. While challenges persist, the sector's resilience and adaptability bode well for future growth and investment. With a focus on stability and strategic reinvestment, the manufacturing sector is poised for continued advancement in the quarters ahead.