Production levels in the metals and engineering sector had reached pre-Covid-19 levels by December 2021, and production in the sector expanded by 4.7% month-on-month between December 2021 and January this year.

Total sales also rose by 6.2% to R71.6-billion from R67.4-billion during this period, says industry organisation Steel and Engineering Industries Federation of Southern Africa (Seifsa) COO Tafadzwa Chibanguza.

Between December and January, increases were noted in the electrical machinery products, up by 14%; rubber products, which increased by 12%; and basic iron and steel, which increased by 11%.

Conversely, production decreases were experienced in vehicle parts and accessories, which decreased by 12% between December and January; household appliances, which decreased by 9%; and structural metal products, which decreased by 6%.

On a year-on-year basis, production in the total sector expanded by 1.2% in January. The metals and engineering sector, made up of 13 subsectors, constitutes 30.9% of the total manufacturing sector, and total manufacturing production expanded by 1.9% between December 2021 and January.

“The positive production data recorded in January is very much in line with the other data points released in the past few days, namely the Purchasing Managers Index and the Business Confidence Index, which all showed notable improvement. This confirms that, from the last quarter of 2021 into the first few months of 2022, global economic recovery was starting to take shape and generally supportive of domestic growth in various sectors,” says Chibanguza.

However, the geopolitical developments involving Russia and Ukraine present downside risks for this recovery. Risks include heightened uncertainty, volatility and inflationary risks that will manifest through food and the commodities complex, including oil prices.

This will likely force the South African Reserve Bank to act much sooner and more aggressively than originally anticipated, hurting the prospects of the recovery.

Domestically, the recent bouts of load-shedding will also dampen the outlook of the productive sectors, Chibanguza adds.

“While South Africa cannot do much about the global geopolitical landscape and the risks that will manifest from the developments in that arena, resolving domestic challenges through implementing urgent reform in the electricity supply industry is entirely in the country’s control.

“Seifsa will continue to press for the necessary reforms to safeguard productive capacity in order to stimulate much-needed growth,” Chibanguza says.