Power Crisis at Eskom Dashes Hopes for any Improvement in Manufacturing in 2015

by Vivian Atud

Johannesburg–Sunburst AfricaIn 2014 manufacturing production decreased by 0, 1% compared with 2013. Lower production was reported by four of the ten manufacturing divisions. This has not come as a surprise to many South Africans. You may be wondering why do I say so?  Let us examine some of the reasons.

  1. Last year saw the resurrection of power cuts that were last seen in 2008. Power cuts interrupted manufacturing and its negative impact was very devastating for small and medium sized businesses.
  2. Last year also saw a decrease in demand for various products from South Africa by its trading partners due to global economic hard times.
  3. Last year also saw prolonged labour strikes in various sectors including manaufacturing.

South Africa has huge manufacturing capability and huge potential to expand its markets beyond current trading partners. Manufacturing has been identified by government as one of the key sectors that can promote growth and job creation. However, this ideal will remain a mere dream in 2015 if power crisis at Eskom continues. It is estimated that Eskom has asked huge industry consumers of electricity to reduce usage by 20%- this indirectly means reduce production potential especially for SSMs who cannot afford huge and expensive generators that can be used in big companies.

Statistics South Africa (Stats SA) conducts a monthly survey of the manufacturing industry, covering manufacturing enterprises. This statistical release contains the results of a sample drawn from the business sampling frame (BSF), with enhanced coverage of South African businesses. The release contains monthly indices of the physical volume of manufacturing production and monthly value of sales of manufactured products by divisions and major groups within manufacturing.

According to data released this week by statistics South Africa the annual decrease of 0, 1% seen in 2014 compared to 2013 was mainly due to lower production in the following divisions:

  • basic iron and steel, non-ferrous metal products, metal products and machinery (-3,0% and contributing  0,6 of a percentage point); and
  • glass and non-metallic mineral products (-5,8% and contributing -0,3 of a percentage point).

From this data and the current electricity crisis, there is little hope of any increased manufacturing in 2015. South Africa needs to urgently solve the electricity problem if it is to get ahead with sustained manufacturing.

For more information: contact info@atudandassociates.co.za

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