SA’s manufacturing production fell to its lowest level in nearly a year in February on an annual basis, reflecting the cost of power cuts on food manufacturers and allied sectors.
Manufacturing output fell 5.2% year on year in February, Stats SA said in a statement on Tuesday. The reading was worse than a 2% drop forecast by economists in a Reuters survey.
The numbers give a glimpse into how the economy may have performed in the first quarter.
On a month-on-month basis, seasonally adjusted manufacturing production contracted 1.3% in February 2023 compared with January, worse than market forecasts. This followed month-on-month growth of 0.5% in January and 0.2% in December.
“The dire electricity supply situation remains a key downside risk to the energy-intensive manufacturing sector,” Investec economist Lara Hodes said in a note, adding that electricity production and consumption fell by a marked 9.7% and 8.7% respectively when measured on an annual basis.
The figures coincide with the findings of a manufacturing survey conducted by the Bureau for Economic Research in partnership with Absa Bank which also suggested that the sector was taking strain from rolling power blackouts.
The monthly Absa purchasing managers’ index remains below 50, which separates expansion from contraction.
ETM Analytics head of research George Glynos said liberalising network industries such as energy and transport would improve the fortunes of the ailing manufacturing sector, which contributes about 14% of GDP.
“But that will take years to complete and these same network industries are struggling at the moment. However, any policies that promote fixed investment into machinery and production plans will in turn help the manufacturing sector recover, albeit off a low base.”
Manufacturing output, like mining, is particularly sensitive to load-shedding, now an almost daily occurrence.
The energy availability factor — the percentage of total installed capacity available — stands at about 53% and could worsen going into a winter season when demand could far outstrip supply.
The focus will now shift to February’s mining production, due out on Thursday, in which energy constraints are again expected to feature.
Mining output fell 1.9% in January compared with that of the matching period a year earlier but was better than the Bloomberg consensus expectation of a 2.8% drop.
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