Confidence in South Africa’s manufacturing sector improved in the fourth quarter on a recovery in domestic demand, but export performance remained poor, the Bureau for Economic Research said on Thursday.
The independent bureau’s manufacturing business confidence index increased by four points to 69, nudged up by growth in sales and orders which exceeded producers’ expectations.
”The increase was on the back of a recovery in domestic demand as well as slight relief on the cost pressure front,” said BER economist Christelle Grobler. ”On the other hand, the export performance of the sector remained dismal.”
The BER said the sector expected growth in sales and order volumes to slow during the first quarter of 2008.
Exports in Q4 were undermined by cost pressures from both raw materials and labour, steep competition for markets abroad and a relatively strong rand currency.
The rand last traded at 6,74 against the dollar on Thursday, a gain of 3,4% over its levels at the start of the year, after shedding nearly 10% last year.
BER said shortage of skilled labour remained the most serious constraint on manufacturing activity in South Africa, with 43% of producers surveyed, singling it out.
Other restrictions included a shortage of raw materials and higher short-term interest rates, while 23% of respondents cited the prevailing political climate as a worry.
The African National Congress chooses new leaders at the weekend, with party deputy president Jacob Zuma tipped to win the top post, which would leave him well-placed to become state president in 2009.
Local and foreign investors are nervous about the economic policy implications of his trade union and left-wing links. – Reuters