More Manufacturing Misery

The seasonally adjusted Kagiso Purchasing Managers’ Index (PMI) for September fell sharply by 7.4 points to 49.1 in September. The index is now below the key 50-point mark for the first time since March this year. What do our experts make of it? We give some extracts from their recent statements.

Abdul Davids, Head of Research at Kagiso Asset Management:
Intermittent mining sector disruptions and fears about future industrial action may be weighing on manufacturers. If this is the case, an end to the vehicle component strike and a quick resolution to AMCU’s strike in the platinum mining sector should see an imminent rebound in activity and orders.

Coenraad Bezuidenhout from the Manufacturing Circle:
The manufacturing recovery shock signalled by the Kagiso PMI for September must be laid squarely at the feet of the protracted industrial action we have seen in vehicle manufacturing, automotive components and the platinum sectors. It is a wake-up call that a myopic and reckless approach to industrial relations will lead to reversals in manufacturing recovery, and ultimately to job losses. If industrial peace does not prevail to support other positive developments in the manufacturing space (weaker rand, local procurement traction) this could impact the growth of the economy markedly, and lead to employment losses as manufacturers contract or mechanise to stay afloat. The way our dismal labour market outcomes undermine the ability of our economy to recover should be viewed as a national emergency that requires resolute political action. The fact that we have recently again seen 11th hour concessions to labour demands in Parliament for an even more punitive employment dispensation (in relation to labour relations and employment equity amendments, as well as the Employment Services Bill) means the ranks of the unemployed will grow and the sustainability of our economy will deteriorate. This environment will also limit any positive impact that the Employment Incentives Bill may have on growing youth employment, as it will undermine overall employment growth. Growing the economy and jobs require tough trade-offs. President Zuma will have to decide how long his government will shore-up organised labour at the cost of economic growth and jobs, and the growing exclusion of the unemployed and the poor. As the PMI illustrates, the negative impact for manufacturing is very real.

A worrying indicator. However, things should pick up if there can be a speedy resolution to the latest wave of strikes. Trade data out yesterday show that ZA can ill afford a sick manufacturing sector.

Tweets of the Day:
Funny Tweets ™ (@Lmao): Someone: so what are you getting for Christmas? Me: fatter.

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