Low demand causes under-utilisation of manufacturing capacity

(Picture: KPMG)
(Picture: KPMG)

Cape Town - Insufficient demand remains by far the biggest reason for the under-utilisation of capacity by large manufacturers in South Africa.

This is reflected in the latest data released by Statistics South Africa on Thursday. The results of the quarterly manufacturing utilisation of production capacity survey by Stats SA are used to assess the degree of capacity constraint experienced in the country's manufacturing industry.

Insufficient demand was also by far the top reason given by large manufacturers in the quarterly surveys in February 2017 and November 2017.

Other reasons provided for under-utilisation were shortages of raw materials and labour.

The utilisation of production capacity by large manufacturers was 80.5% in February 2018 compared with 80.4% in February 2017, an increase of only 0.1 of a percentage point.

Dip in capacity utilisation

Nicolai Claassen, a statistician at Stats SA, told Fin24 there has been a dip in the utilisation of capacity in the country since the start of the global financial crisis in 2008. Since then there has been a slight recovery, but not to the levels reached before the financial crisis.

The survey covers large manufacturing enterprises - those with a turnover greater than R100m a year. They mainly conduct business in the manufacturing, processing, making or packing of products; the slaughtering of animals, including poultry; and installation, assembly, completion, repair and related work.

Four of the ten manufacturing divisions forming part of the survey showed increases in utilisation of production capacity in February 2018, compared with February 2017.

The highest rates of utilisation of production capacity in February 2018 were reported in the divisions radio, television and communication apparatus and professional equipment (84.8%); wood and wood products, paper, publishing and printing (82.4%); motor vehicles, parts and accessories and other transport equipment (82.2%); petroleum, chemical products, rubber and plastic products (81.9%); and food and beverages (81.4%).

The largest increases were recorded in the divisions motor vehicles, parts and accessories and other transport equipment (1.8 percentage points); glass and non-metallic minerals (0.8 of a percentage point); and radio, television and communication apparatus and professional equipment (0.6 of a percentage point).

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