Manufacturing investment growth slows — but third-quarter pick-up expected
Manufacturers are ready to invest as soon as demand increases, says the Manufacturing Circle
Despite weakening production in the manufacturing sector, manufacturing companies continue to invest in plant and equipment, research and development, and human capital, according to the Manufacturing Circle.
However, investment growth slowed, the industry group’s investment tracker index for the second quarter showed on Wednesday. It dropped five points to 58, from 63 in the first quarter.
A level above 50 indicates an expansion in enterprise investment, while a level below indicates a contraction.
Fifty enterprises, with average annual revenue of R2.1bn, participated in the survey.
According to Nampak CEO and Manufacturing Circle chairman André de Ruyter, manufacturing has the highest multiplier effect in job creation, adding five to eight indirect jobs for every one direct job created.
"Demand is the big driver of investment — manufacturers are ready to invest if demand grows," he said on Wednesday.
"It is vital for industry and government to collaborate to unlock the economy to enable job creation. The country needs a one-point plan to address the crisis of the unemployment we face."
The survey analyses four specific areas of investment: property (land and buildings), plant and equipment, human capital, and research and development.
Investment slowed in property maintenance, which dropped 13 index points to 49, and inventory, which fell 10 points to 56.
Expenditure on human capital showed a decline from 62 to 58 points, but manufacturers had continued to train and develop employees in the second quarter.
The Manufacturing Circle, however, is confident the overall investment index will rise to 61 points in the third quarter.
Executive director Philippa Rodseth said: "In spite of current challenging economic conditions, the manufacturing sector remains resilient and committed to growing the economy, and in so doing, jobs.
"Increasing demand is critical, both in terms of public and private sector procurement."
This comes as Stats SA showed last week that manufacturing production increased by 1.5% in the second quarter of 2017 compared with the first quarter of 2017, with six of the 10 manufacturing divisions reported positive growth rates over this period.
The sector, however, experienced a significant drop in June, falling 2.3% compared with a year earlier.