The manufacturing landscape in South Africa has undergone a fundamental shift over the past two years thanks to several complexities that have had an impact, both locally and globally. In the country, the power supply remains a significant obstacle, while global instability, port complexities and rising fuel prices add their own challenges to the mix.
Amith Singh, head of energy at Nedbank, unpacks the turmoil and the potential in the manufacturing sector.
However, in spite of these issues, the manufacturing sector has shown impressive resilience and an optimism that is set to promote growth.
In the first quarter of 2022, the South African economy grew by 1,9% at the back of a 1,2% growth in the last quarter of 2021, returning the country to its pre-Covid-19 pandemic levels. The manufacturing sector showed an increase of 4,9% in the first quarter, making it a solid contributor to the overall economic performance of the country.
That said, it is unlikely that this growth will be reflected in the second quarter of 2022 due to the floods in Kwa-Zulu Natal, the ongoing conflict between Ukraine and Russia, China’s zero-Covid measures and the strain on the electricity supply.
The latter has hindered the sector as many of the specialised machinery and equipment required to keep manufacturing plants fully operational need start-up times. Plus, with a period of two hours without electricity, machinery is not optimised or fully used for up to eight hours.
The country has come a long way in adapting to this volatility and it is likely to continue with this level of strength and resilience into the rest of the year. Some of the successes that have stood out over the past two years have come from companies that have streamlined their operations and diversified their offerings, both vertically and horizontally.
This has meant they have been able to implement more stringent measures around cash flow and resources and this has kept the companies operating and measurably improving.
There’s also been a visible increase in the adoption of e-commerce channels and companies embracing technological advancements to further optimise processes and drive performance.