'Too early' to gauge effects of weak rand, says industry body

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It is still awaiting the results of its survey of manufacturing business conditions for the fourth quarter of last year‚ but says third-quarter indications were that only 7% of manufacturers were looking to significant mechanisation to aid their competitiveness.

However‚ there is concern about the effect that currency weakness is having on the import of capital goods.

"Rand weakness will no doubt lead to higher prices for capital goods. The exact effect will only register itself in a couple of months' time‚ and is obscured by the volatility of the rand‚" Manufacturing Circle MD Coenraad Bezuidenhout said on Tuesday, 28 January 2014.

The body is made up of a number of SA's medium to large manufacturing companies from a wide range of industries‚ some of which are big exporters of manufactured goods‚ while others are domestic companies competing with global imports.

Bezuidenhout said the benefits of the weaker rand had thus far been more about the amelioration of margin squeeze - with the weak currency creating some pricing space in export markets and also by making import competition less competitive.

He also said rand volatility rather than rand weakness was frequently mentioned by manufacturers as a problem. To this end‚ SA "needs greater labour stability" and "fiscal policy implementation in line with broader macroeconomic goals".

Bezuidenhout said a weaker rand would not "magically lift demand" in SA's "slowly-recovering traditional export markets" - Europe and the US - but it did benefit some natural import replacement in the domestic market.

"Demand from African export markets is encouraging but constrained by costs‚ red tape and infrastructure troubles‚" he said.

"(SA) crucially needs the Chinese and the Brazilians to start buying manufactured goods from us‚ but the tariff and nontariff barriers in those markets are very steep."

He said SA needed to drive down administered costs‚ while raising demand‚ through local procurement‚ for accelerated infrastructure roll-out and the opening of markets in Africa‚ Asia and South America.

Last week‚ National Employers' Association of SA CEO Gerhard Papenfus said the country was losing out on business and opportunities to create more jobs because of escalating labour costs and other input price increases.

He said employers unable to cope with this were having goods produced elsewhere and brought into SA as finished products‚ which compromised local jobs.

"Each product that we import means we have exported a couple of jobs‚" Papenfus said.