South Africa saw modest year-on-year (YoY) growth in production in October, according to Stats SA’s latest manufacturing production and sales data, released on Thursday — and that was before Eskom rear-ended the economy with a fourth edition of Stage 6 rolling blackouts. 

Now, reports suggest the power utility called off a planned six-month outage of Koeberg Unit 1 at the eleventh hour as it tried to avoid moving to Stage 7 and energy expert Ted Blom issued a morose warning about an imminent escalation to Stage 8. 

The monthly survey of the manufacturing industry, which is heavily reliant on a stable energy supply, indicates that up to the end of October, production sales had increased by 1% YoY, with the biggest positive contributions made by basic iron and steel, non-ferrous metal products, metal products and machinery (13.9%) and motor vehicles, parts and accessories and other transport equipment (22.9%).

The petroleum, chemical, rubber and plastic products, as well as the food and beverages industries, declined by 9.6% and 4%, respectively. 

Manufacturing production, seasonally adjusted to remove variations in the data, was 6.3% lower in October than in the previous month, with month-on-month changes of 5% in September and 2.1% in August 2022.

Seasonally adjusted manufacturing production increased by 2.7% in the three months ended October 2022 compared with the previous three months. 

Seven of the 10 manufacturing divisions reported positive growth rates over this period, with the biggest positive contributions made by motor vehicles, parts and accessories and other transport equipment (24.7%); wood and wood products, paper, publishing and printing (6%); and food and beverages (2.8%).

The biggest drags on growth were petroleum, chemical products, rubber, and plastic production, which declined by 5.3%.

Sales results for October indicate that seasonally adjusted manufacturing sales decreased by 4.3% in October compared with September, after month-on-month changes of 3.7% in September and 1.2% in August.

Seasonally adjusted manufacturing sales were 1.6% higher in the three months ended October 2022 than in the previous three months. Again, the largest positive contribution was made by motor vehicles, parts and accessories and other transport equipment (14%), with the largest negative contribution made by basic iron and steel, non-ferrous metal products, metal products and machinery division (-7.2%). 

Manufacturing production is far below Bloomberg’s expectations of a 5.6% YoY lift. 

In an analysis of the latest data, Investec economist Lara Hodes observes that the basic iron and steel category, with a weighting of 19.73%, contributed 2.5% points to the topline reading on the back of annual growth of 13.9%, while motor vehicles, parts and accessories and other transport equipment added a further two percentage points. 

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“This was, however, offset by declines in other key categories. Specifically, the petroleum and chemical grouping contracted by -9.6% y/y and the food and beverages segment by -4% y/y. Accordingly, together they detracted -3% points from the headline outcome.”

Read in Daily Maverick: “SA’s manufacturing and mining production in September defies the rolling blackout blues”

In October, the Absa Purchasing Managers’ Index (PMI) indicated a seasonally adjusted increase from 48.2 index points in September to 50 in October — a slight improvement on the average recorded during the previous quarter (49.6), but smarting from the Transnet strike and reduced exports, while rolling blackouts knee-capped hopes of recovery in activity and demand. At 48.8 points, the PMI compiled by the Bureau for Economic Research (BER) at Stellenbosch University, showed the best reading since March 2022, but the BER said the employment index, at 41.5 points, worked against the improvement in activity and fell in October.

Hodes says the PMI survey from October revealed that both business activity and new sales orders indices remained below 50 during the month, with export activity heavily affected by the Transnet strike which commenced on 6 October, compelling Transnet to declare a force majeure. This was a sucker punch to any hopes of export increases for the month, with a decline of 17% m/m that month.

She says November’s Absa PMI survey results are already pointing to a modest improvement in manufacturing activity. 

“Specifically, the PMI gauge moved convincingly into expansionary territory with a reading of 52.6, supported by the new sales orders sub-index which moved above 50 for the first time since May 2022.”  

The index measuring expectations of business conditions in six months’ time also rose in November, which is encouraging; however, with Eskom likely to push the country to Stage 6 and worse in the coming weeks and months, the energy-intensive manufacturing sector is going to take a beating. DM/BM