More disappointment for South Africa’s economy

South Africa’s manufacturing sector showed minimal growth in December, with it set only to have a diminutive impact on the country’s Gross Domestic Product (GDP) figure for Q4.

StatsSA’s data showed that South African manufacturing production increased 0.7% year-on-year in December 2023 – the slowest increase in three months primarily attributed to a struggling energy sector.

“While load shedding eased somewhat in December, the electricity supply predicament remains a significant challenge for the energy-intensive manufacturing sector and the economy as a whole,” said economist Lara Hodes from Investec.

Additionally, quarter-on-quarter seasonally adjusted basis (the measure used to calculate GDP), manufacturing output largely fell flat at 0.1%.

“Accordingly, it will make a negligible contribution to the quarter’s overall GDP reading,” said Hodes.

Manufacturing production in South Africa was up by a marginal 0.7% year-on-year in December 2023, which was notably below expectations of a 2.7% year-on-year lift.

The largest contributions were made by:

• Petroleum, chemical products, rubber and plastic products (5.3% and contributing 1.1 percentage points);

• Wood and wood products, paper, publishing and printing (2,7% and contributing 0,3 of a percentage point); and

• Food and beverages (0,9% and contributing 0,3 of a percentage point).

Additionally, seasonally adjusted manufacturing production decreased by 1.7% in December compared with the previous month.

Manufacturing sales

Seasonally adjusted manufacturing sales increased by 1.3% in December 2023 compared with November 2023.

This follows month-on-month changes of +1.7% in November 2023 and -0.6% in October 2023.

Numbers show that 5 of the 10 categories included in the manufacturing basket increased annually in December. Petroleum, chemical products, and rubber and plastic categories collectively comprise 24.86% of the manufacturing basket, contributing 1.1% points to the overall growth of 5.3% y/y.

The largest volume of sales were in the food and beverages division, followed by basic iron and steel products, and then petroleum/chemical products.

Yearly manufacturing statistics

Total manufacturing production increased by 0,4% compared with 2022. This is a marginally better performance than the 0.3% annual decline seen in 2022.

In 2023, the largest positive contributors to this were:

• Basic iron and steel, non-ferrous metal products, metal products and machinery (1.7% and contributing 0.3 of a percentage point);

• Motor vehicles, parts and accessories and other transport equipment (2.2% and contributing 0.2 of a percentage point);

• Wood and wood products, paper, publishing and printing (1.4% and contributing 0.2 of a percentage point).

The “still subdued global manufacturing environment continues to undermine export potential,” said Hodes.

“Advance indications provided by the seasonally adjusted (SA) headline Purchasing Managers’ index (PMI) for January reveal that the manufacturing sector remained depressed at the start of 2024, with both the business activity and new sales orders indices declining markedly during the month.”

Read: Businesses in South Africa hoping for the best in 2024