SEIFSA ANNUAL REVIEW 2018
ECONOMIC AND COMMERCIAL DIVISION
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n line with SEIFSA’s mission, the Economic and Commercial (EC) division’s objective is to enhance the profile of SEIFSA by providing input to the national discourse on economic, trade and commercial matters. This is aimed at generally improving business conditions in the metals and engineering (M&E) cluster in particular and the broader manufacturing sector in general. To this end, the division provides the following services: •
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Annual sectoral level economic research and statistical analysis of key variables including an overview of the domestic and international macroeconomic environment and insightful industry market appraisals to SEIFSA member associations, the government and other key stakeholders; Update the Price and Index Pages (PIPS) (a flagship product for the metals and engineering cluster) continuously, with the latest statutory and sector specific cost indices for relevant economic indicators including intermediate input costs. The PIPS indices are, therefore, useful for tracking of changes in costs, benchmarking of standards and best practices, calculating of contracts (or tenders) price adjustments or escalation and for generally updating price lists; Contract Price Adjustments (CPAs) workshops where delegates are guided through the process of using the PIPS indices (based on longitudinal or real-time data) to substantiate price adjustments and how to use model formulas for computation of price adjustments; Adhoc consulting services in industry-related matters aimed at improving business savvy and operational excellence.
ECONOMIC ENVIRONMENT
The economic environment in South Africa is shaped not only by its own domestic dynamics but also by a bigger global reality due to the openness of our economy as measured by the trade to gross domestic product ratio (that is, exports plus imports = 58% of GDP), and also our large current account deficit (4.8% of GDP or R229bn annually), requiring foreign capital inflows. The challenges faced by the South African economy as evidenced by low economic growth invariably transcend to the M&E cluster, which is a small open sector with a high propensity to attract a significant amount of foreign currency. Generally, GDP growth post the 2014 production crises has been very poor, largely trending below 2% thereby constricting the expansion of various sub-components in the cluster. Although there was an increase in production during the financial year ended 2018, the challenges of the sector are still prevalent and the cluster is still going through a structural change. However, despite the economy being stuck in continuous low growth levels post the global economic and financial crises, with rising intermediate input costs and record high unemployment rate (particularly amongst the youth), the expectation is for the resilience of the cluster to prevail in 2019. Accordingly, constant support from relevant industry stakeholders and the government is needed to boost productive processes and demand for the intermediate products of the M&E cluster towards sustainability, given its strategic importance. The cluster’s share of manufacturing stood at 29.05%, effectively contributing 3.52% to the gross domestic
