ABSA: Manufacture confidence steady at 28 points

The latest third quarter results from ABSA's Manufacturing Survey have revealed that confidence levels among local manufacturers remained steady at 28 points, marking the highest level seen since the beginning of 2022. To discuss these findings and the current state of the manufacturing sector, CNBC Africa had an exclusive interview with Justin Schmidt, Executive for the Manufacturing Sector at ABSA Business Banking. Schmidt highlighted various aspects contributing to the optimism in the sector, such as positive sentiment towards the formation of the Government of National Unity (GNU) and improvements in policy environments and investments in critical areas like ESCOM and renewable energy. Despite the positive outlook, challenges such as supply chain constraints, low local and global demand, and inefficiencies at ports continue to impact the industry's potential growth. However, Schmidt remains hopeful for the future, especially with anticipated rate cuts from the Saab that could boost manufacturers and consumers alike. As the manufacturing sector in South Africa navigates through a mix of optimism and challenges, industry experts and stakeholders are closely monitoring key trends and developments to drive sustainable growth and recovery. The recent ABSA Manufacturing Survey results have shed light on the sector's confidence levels, which have held steady at 28 points, signaling an upward trajectory from previous periods. One of the primary drivers of this optimism, according to Justin Schmidt, Executive for the Manufacturing Sector at ABSA Business Banking, is the positive sentiment surrounding the formation of the Government of National Unity (GNU). Schmidt emphasized that while the election played a role, broader factors such as policy clarity, investments in essential infrastructure like ESCOM, and projects like Operation Voolend Lela are contributing to sustained optimism. Schmidt highlighted industries like textiles and furniture as significant drivers of confidence in the manufacturing sector, with opportunities also emerging in key sectors like transport, automotive, and food and beverage. However, despite the positive outlook, challenges such as supply chain constraints and low local and global demand present hurdles for sustained growth. The issue of poor railway infrastructure and inefficiencies at ports continues to hinder South Africa's export potential, impacting manufacturers' ability to reach their full capacity. Schmidt emphasized the importance of unlocking efficiency at ports through the involvement of foreign operators and improving transport logistics to reduce delays and working capital constraints. The sector remains optimistic about increasing exports and local sales, with plans to invest in machinery upgrades and refurbishments. Looking ahead, the anticipated rate cuts by the Saab are poised to provide a significant boost to manufacturers by lowering their funding costs and potentially increasing consumer disposable income. Schmidt pointed out that a healthier consumer environment translates to higher demand for manufactured goods, both locally and in the export markets. Overall, the expected rate reductions and positive consumer outlook offer a promising outlook for the manufacturing sector in the coming months.