Local Manufacturers Invest in new Technology

South African's struggling manufacturing sector is taking steps to improve its competitiveness despite negative economic fundamentals.

 

About 70% of respondents in the fourth-quarter survey conducted by industry body the Manufacturing Circle said they had invested in new technologies to improve production facilities.

Three quarters said they had already implemented new, innovative and efficient methods that would enhance processes.

Discussions with the 72 manufacturers who participated in the survey indicated that funding was being backed by large companies as state funding remained constrained, Nascence Research and Advisory chief economist Xhanti Payi said on Thursday.

The company conducted the survey on behalf of the Manufacturing Circle.

The investments were happening despite revelations at the end of last year that an allocation of R5bn in the Department of Trade and Industry’s Manufacturing Competitiveness Enhancement Programme had been exhausted.

However, investments by South African companies could be part of a global trend. Manufacturers worldwide were investing in advanced methods of producing goods as slowing global growth forced firms to improve efficiencies to protect profits.

"Local manufactures are working towards a more mechanised form of manufacturing to boost their global competitiveness," Mr Payi said. "In the long term, increased mechanisation could result in job losses." However, advanced production methods could result in increased demand for skilled workers.

The manufacturing sector employs about 1.8-million people, according to Statistics SA.

Manufacturing output in SA has declined over the past five years, as power outages, rising wages and labour unrest undermined the sector, which makes up the fourth-largest contribution to gross domestic product, after mining.

Between 2011 and 2014, the country’s share of global exports fell 15%, according to an International Monetary Fund report, despite a weaker rand which generally benefited manufacturers by making exports cheaper.

However, anecdotal evidence from manufacturers in the Manufacturing Circle’s latest survey indicated that the weak rand would soon start to play a more significant role in improving exports.

"Some companies said they had started to receive orders from countries that previously did not buy from them," Mr Payi said.

The department’s competitiveness enhancement programme was suspended in October after demand for its funds was oversubscribed, with smaller manufacturers threatening a class-action lawsuit, arguing that their applications had been rejected arbitrarily.

Department spokesman Sidwell Medupe confirmed on Thursday that the incentive fund would remain suspended until the Treasury had allocated more funds in the upcoming budget.

"We will only advertise for new applications once we know how much Treasury allocates us in the new budget," Mr Medupe said.

by Fifi Peters.