Despite South Africa’s political conflict and economic troubles, there is one sector of the economy that’s picking up. The food and beverage sector fed just over one percent growth in manufacturing in December 2014. CCTV’s Angelo Coppola reported this story from Johannesburg.
Food production drives 1.1% manufacturing increase in South AfircaDespite South Africa's political conflict and economic troubles, there is one sector of the economy that's picking up. The food and beverage sector fed just over one percent growth in manufacturing in December 2014. CCTV's Angelo Coppola reported this story from Johannesburg.
Despite that growth, economists aren’t optimistic.
“If you keep in mind that manufacturing output should give you a pretty good estimate of a large share of the economic activity. The 1.1 percent still shows it is up from a contraction in November, but it’s still not that great,” Lulu Kugel, chief economist of KPMG, said.
Business associations have been concerned for some time now about the manufacturing sector, as it’s the backbone of the country’s economy.
“There’s not much the private sector can do, because they rely on the macro environment in which they operate. And we’d have seen that macro environment become less favorable to manufacturers. Whether it’s labor, whether it’s dear old Eskom, it’s very hard to grow any kind of business in South Africa, especially a manufacturer, if you don’t have a consistent reliable source of power,” Joan Warburton-McBride, CEO of Johannesburg Chamber of Commerce and Industry, said.
“We have fallen well behind in people’s decision making as to where they are going to put that capital where they are going to put that investment, and where they are going to put that intellectual property.”
While electricity constraints are cited as a major inhibitor to economic growth, there is another challenge bubbling under the surface.
“Our water infrastructure is pretty old. We have known that for a while. I think there’s been a lot of talk about it, but I hope that the action comes. As part of the SIPs (special industrial programs) there are some water projects. But it’s about the basic pipes and infrastructure in the towns, and making sure that keeps running. Otherwise we might have another crisis on our hands pretty soon,” Kugel said.
While the manufacturing data was up marginally for the end of the year, it doesn’t bode well for the remainder of 2015 or 2016. There is also one other major white elephant in the room, and that’s water provision. The manufacturing sector needs water.