JOHANNESBURG, 9 MARCH 2021 – The rise in economic activity in the fourth quarter of 2020 is very encouraging, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
Commenting the announcement by Statistics SA (StatsSA) that real GDP rose at an annualised rate of 6.3% in the fourth quarter of 2020, which is was lower than the second quarter’s growth rate of 67.3%, SEIFSA Chief Economist Chifipa Mhango said signs of recovery were already evident, with production declines easing in key sectors such as manufacturing and mining, and purchasing managers’ index numbers moving into expansionary territory amid the relaxation of COVID-19 lockdown restrictions.
The growth rate in the fourth quarter of 2020 was attributed to mainly eight sectors recording positive growth between the third and fourth quarters. Of these, manufacturing registered the biggest positive growth rate with 21.1%, while the construction sector grew by 11.2%. Mr Mhango said he was particularly encouraged by the growth in these two sectors as they are key market segments for Metals and Engineering (M&E) sector products, accounting for more than 70% of the industry’s production sales volume in South Africa.
However, overall total GDP for South Africa in 2020 declined by 7% when compared to 2019 as a result of COVID-19 lockdown measures, with the construction, mining and manufacturing sectors declining by 20.3%, 10.9% and 11.6% respectively. These figures are in line with what SEIFSA had projected for these sectors.
Mr Mhango noted that Gross Fixed Capital Formation (GFCF) figures were also on a positive trajectory, increasing by 12.1% in the fourth quarter of 2020, although this was lower than the third quarter’s increase of 26.9%. This was mainly attributable to the increase in construction work, residential buildings, machinery and other equipment, as reported by StatsSA. However, on an annual basis, GFCF declined by 17.5% in 2020 when compared to 2019.
Mr Mhango said the M&E industry is heavily reliant on the performance of the mining, construction and building industries.
“Therefore, we are encouraged by the increased demand for our products as the Government commits to its R791.2-billion public infrastructure spending plan over the next three fiscal years. However, to guarantee stock availability, the industry needs to move back to higher levels of capacity utilisation than the current pandemic-driven level of 68% due to working restrictions at plant level,” Mr Mhango said.
He said it would be important for the country to avoid a third wave of infections by observing COVID-19 safety protocols.
Also positive for the M&E industry, Mr Mhango said, is the 26,6% fourth-quarter increase in exports of goods and services, which is mainly attributable to an increase in vehicle and other transport equipment, precious metals, stones and base metals, which form part of the M&E industry.
“This is encouraging, since with local demand still relatively weak, export markets offer opportunities for the M&E industry. However, there has to be policy intervention by the Government to address the challenges faced by the industry in order for it to be competitive internationally. A speedy implementation of the Steel Master Plan remains key,” he concluded.