Investment plan

Slow implementation of infrastructure investment plan delays economic recovery – SEIFSA

A shrinking domestic market, declining production, weak production sales, lower contribution to the economy, rising unemployment, cheap imports and low levels of investment are just some of the problems facing faced by South African companies in the metals and engineering (M&E) sector. According to the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), the ripple effects are felt throughout the economy due to its role as supplier and customer in sub-industries automotive, automotive, mining, construction and other manufacturing industries.

“Manufacturing businesses are an integral part of the supply chain of the South African economy and the sector will struggle to recover without support. The sector is already highly dependent on demand from government projects to boost its production and sales. , especially for products such as steel and This is why the government must accelerate the implementation of its plan for investment in infrastructure and reforms in public enterprises, because the lack of progress on these projects and on others is delaying the recovery of our economy,” says Lucio Trentini, CEO of SEIFSA.

Some form of protection against import dominance, while promoting domestic manufacturing and suppliers, can also make a difference, although in the longer term the sector’s international competitiveness will need to improve before local producers can assume the role of preferred supplier for national and international markets, he said.

There is also assistance in the form of the African Continental Free Trade Area Agreement (AfCFTA), which provides new business opportunities on the continent in the M&E sector.

Impact of accelerating producer inflation

Costs remain an issue for manufacturers. The unexpected acceleration in producer inflation in December highlighted the effect of rising global energy prices and global supply chain issues. According to the latest data published by Statistics SA, the producer price index (PPI) for finished manufactured goods increased by 10.8% year-on-year in December, compared to 9.6% in November. Stats SA said coke, petroleum, chemicals, rubber and plastic products were the main contributors to the higher number; these product categories include gasoline and diesel prices, which are close to record highs.

Manufacturers are also having to contend with falling prices, which benefits buyers of M&E products, but puts huge pressure on manufacturers’ profit margins, which in turn leads to job losses as companies are looking for ways to cut costs.

Stubbornly high unemployment rate

SA’s official unemployment rate was recorded at 34.9% in the third quarter of 2021 – the highest unemployment rate since comparable data began in 2008 – due, among other things, to the looting that took place in July , made worse by the strict lockdown measures.

Unemployment data showed that 660,000 jobs were lost between the third and second quarters of 2021. The broader manufacturing sector lost 13,000 jobs. The lack of employment opportunities affects the economic situation of the country and, more importantly, the livelihoods of all its inhabitants.

The industry has expressed concern over the stubbornly high unemployment rate. SEIFSA called on the government to tackle the problem, while finding ways to reduce the cost of electricity, diesel and petrol to help get the economy back on track.

M&E is a strategic industry for South Africa, so plans to reindustrialise the sector, including primary steel and downstream industries which employ over 200,000 workers, must not be allowed to falter.

Promote industrialization

SEIFSA advocated for infrastructure development as a way to promote industrialization in South Africa, particularly in the M&E sector, as it feeds infrastructure projects from the perspective of input providers, but for recovery takes place, it is necessary to have a clear objective and strong support. for government projects, says Trentini.

“Although it is not possible to say with any degree of certainty how the coming year is likely to play out, it is probably safe to say that 2022 will be slightly better than 2021. However, much depends on the government’s planned infrastructure deployment and the trajectory the covid-19 pandemic will take in the country in the coming months.We hope that the government will finally deliver on both the steel master plan and the promised and long-awaited infrastructure, which aims to stimulate the economy, and not be distracted by the political agenda when all attention and energy must be firmly directed towards economic growth and recovery,” says -he.

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