South Africa’s manufacturing sector ended 2023 on a high note, with the 4th quarter recording a sales figure of R876 billion, representing a new quarterly record, both in nominal and real terms.
It turned out to be a splendid year for the country’s factories, with each and every month recording a new year-on-year record sales performance and managing to maintain real growth of between 4% and 5%. The total manufacturing sales value for 2023 amounted to R3.3 trillion, 10% higher than the previous year (in nominal terms), and well above the average rate of inflation of 6%.
The table depicts the stunning sales performance during December 2023 of key manufacturing groups, which confirms the strategic and growing importance to the South African economy of the motor vehicle and vehicle parts industries.
The continued resilience of the manufacturing sector is especially encouraging against the backdrop of a number of intimidating challenges, including electricity rationing, high interest rates, and capacity utilisation that has not yet fully recovered from the debilitating effects of the Covid pandemic. Although a marginal improvement in the level of capacity utilisation occurred during the 4th quarter of 2023, a lack of sufficient demand remains a deterrent to a further improvement in this key economic indicator.
Fortunately, two of the major manufacturing divisions, namely food & beverages and motor vehicles & parts, did manage to increase their capacity utilisation during 2023. Food and beverage processing represents the largest of the manufacturing divisions, accounting for more than 22% of total manufacturing sales.
It remains a boon to South Africa to enjoy a large measure of food security, with an agriculture sector that is a significant generator of foreign exchange earnings, whilst also playing a key role in the return to price stability after the supply-side shocks of 2020 to 2022.
With the consumer price index having subsided to a level well within the Reserve Bank’s target range for inflation, lower interest rates are just around the corner. This is exactly what is required to beef up demand in the economy, which should lead to a further rise in capacity utilisation in the country’s factories and a continuation of new records for manufacturing sales in 2024.