JOHANNESBURG - The manufacturing Composite Investment Track- er (MCIT) fell 5 index points in the second quarter of 2017 to 58 points, after recording 63 points in the previous quarter.
Nascence Advisory and Research economist Xhanti Payi on Wednesday said that the decline pointed to a slowdown in investment spending by the surveyed manufacturing enterprises.
“Property maintenance recorded a 13-point decline from 62 points in Q1 to 49 points in Q2, suggesting a contraction,” Payi said.
“Inventory recorded a 10-point decline from 66 points in Q1 to 56 points in Q2.”
The index is measured on the 50 points mark, which is considered neutral. Anything above represents expansion while pointers below showed contraction.
Payi said spending on new equipment recovered moderately during the quarter while the maintenance and replacement of new equipment steadied at a fixed growth of 70 points.
He said that spending in research and development investment, however, fell slightly to 56 points.
“Although expenditure on human capital showed a decline from 62 to 58 points, the industry has continued to train and develop employees and capex in the vital area of research and development fell from 60 to 56 points,” Payi said.
“It’s encouraging to note that manufacturing enterprises continue to invest in innovation, which should make the sector more internationally competitive.”
Nampak chief executive and manufacturing circle chairperson André de Ruyter said the manufacturers remained ready to invest if demand grew as it remained the biggest driver of investment.
Ruyter said the index showed that consumer facing companies would have a decline in demand.
“We see markets under pressure, we see people trading down from premium brands to value brands,” Ruyter said.
“Where they are less money to spend they are less demand. It is important that we enable the variety of policy catalyst to resuscitate growth in the South African economy.”
Ruyter said the MCIT expected overall growth to rise to 61 index points in the third quarter indicating foreseeable expansion in enterprise investment.
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He said in spite of current challenging economic conditions, the manufacturing sector remained resilient and committed to growing the economy.
“Increasing demand is critical, both in terms of public and private sector procurement,” he said.
“it is vital for industry and government to collaborate to unlock the economy to enable job creation.
“The country needs a 1-point plan to address the crisis of the unemployment we face.“We need to make it a national priority to grow the economy and create jobs.”