Despite the precarious state of the country’s infrastructure, especially energy, the country’s macro-economy is in good shape, writes Roelof Botha.
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Stage 6 load-shedding, decaying roads, higher interest rates and inflation and a generally incompetent public sector, especially at municipal level, is enough to frustrate even the most ardent optimist.
Fortunately, however, most South Africans are a resilient bunch and, to date, the country has always managed to wriggle itself out of many daunting challenges over the past century. It is also increasingly important to adopt a balanced perspective and not to get carried away by venomous and often exaggerated social media posts predicting the unfolding of an Armageddon-like scenario.
The fact is that, despite the precarious state of the country’s infrastructure, especially energy, the country’s macro-economy is in good shape. Third quarter GDP growth was positive, the ABSA/BER purchasing managers’ index (PMI), is once again above the neutral level of 50 and the Reserve Bank’ leading composite business cycle indicator is close to its recent all-time high.
Furthermore, the latest Altron FinTech Household Resilience Index (AFHRI) ticked up in the third quarter of 2022, with a further increase expected during the last quarter of the year. The latter prospect is more or less guaranteed as a result of the traditional spike in retail trade sales during November and December of each year.
The star of the economic show this week is the country’s manufacturing sector, which has once again demonstrated its resilience and high levels of productivity in the face of government’s dismal failure to ensure the maintenance and expansion of supportive infrastructure.
Ever since the end of the Covid-19 lockdown restrictions, key sectors of the economy have been breaking records. The latest one is the value of manufacturing sales, which hit an all-time monthly high of more than R288 billion during November 2022. During the second half of 2022, the average year-on-year increase in the value of manufacturing sales amounted to more than 17% (in nominal terms).
It is also encouraging to note that most of the key manufacturing divisions and groups have performed exceptionally well during 2022, except for a brief setback that occurred in April because of the floods in KwaZulu/Natal, which led to the temporary closure of a number of large factories, most notably Toyota SA.
Note: Only includes groups that have a weighting of more than 1% in the volume index
Source: Stats SA
During 2022, several manufacturing groups continued to benefit from increased export earnings, most notable vehicles, parts & accessories, basic chemicals, metal products and a variety of processed food products.
It stands to reason that last year’s sterling performance by the manufacturing sector will be a hard act to follow unless the web of bureaucratic obstacles facing businesses is deregulated and the supply of electricity is adequate and becomes more stable. With total manufacturing sales expected to breach the R3 trillion level in 2022, government can ill afford to neglect the establishment of a more conducive business environment for the country’s factories.
This could include the provision of loans at preferential interest rates by the Industrial Development Corporation (IDC) – earmarked for the installation of solar photovoltaic power generation. The IDC is awash with vast amounts of dividend income from its large equity market investments and should start coming to the party with innovative ways to assist the country’s manufacturing sector in its quest to remain on a steady growth path.
Dr Roelof Botha is Economic Advisor: Optimum Group. News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.