2017: Q3. agriculture, forestry & fisheries

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1 agriculture, forestry & fisheries

2 PREFACE The agro-processing industry is among the sectors identified by the Industrial Policy Action Plan (IPAP) and the National Development Plan for its potential to spur growth, development and job creation via its strong backward and forward linkages with the other sectors of the economy. DAFF established the Directorate: Agro-processing Support in 211 to facilitate the processing of raw primary agriculture, forestry and fisheries commodities into value added products. One of the functions of the directorate is to provide timely and updated economic information regarding agro-processing industry as part of monitoring and evaluating the performance of the industry. Additionally, economic indicators provide an insight into the effects of economic policies and other exogenous factors. To achieve this purpose, the directorate publishes regular quarterly review of the agro-processing industry. This publication Quarterly Economic Review of the Agro-processing Industry in South Africa: July to September 217 evaluates the performance of the nine divisions within agroprocessing industry during. These divisions, which are in line with the Standard Industrial Classification are: tobacco, textiles, wearing apparel, leather and leather products, footwear, wood and wood products, paper and paper products, rubber products and furniture. The main economic indicators reviewed are the changes in producer price, production volume, value of sales, capacity utilisation by large enterprises, formal employment and trade balance. A sector-specific outlook is also presented for selected divisions. Any comments and suggestions on the content of the publication are welcome. Mahlagedi Victor Thindisa Director: Agro-processing Support Pretoria Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the accuracy of the information reported in this publication. The department will, however, not be liable for the results of action based on this publication. i

3 CONTENTS PREFACE... i EXECUTIVE SUMMARY... ii 1. INTRODUCTION STATE OF THE DOMESTIC ECONOMY THE AGRO-PROCESSING INDUSTRY TOBACCO TEXTILES WEARING APPAREL LEATHER AND LEATHER PRODUCTS FOOTWEAR WOOD AND WOOD PRODUCTS PAPER AND PRINTED PRODUCTS RUBBER PRODUCTS FURNITURE CONCLUSION References Compiled by: Directorate Agro processing Support Department of Agriculture, Forestry and Fisheries Sefala Building 53 Belvedere Street, Arcadia, South Africa All correspondence can be addressed to: Director: Agro-processing Support Private Bag X416, Pretoria 1, South Africa Tel.: +27 (12) Fax: +27 (12) EXECUTIVE SUMMARY VictorTH@daff.gov.za This publication is also available on the internet at: ii

4 EXECUTIVE SUMMARY During, the South African economic growth rate at seasonally adjusted annualised rates moderated by 2,% from a 2,8% growth recorded 217:Q2. The notable moderate growth was due to the decline in the tertiary sector. However, activities in the primary and secondary sector expanded during 217:Q3. The largest contributor to the GDP during the period was as a result of the agricultural sector s increased production in horticulture and field crops (Reserve Bank, 217). During 217:Q3, the agro-processing divisions that registered a positive growth in volume of production were: textiles, wood and wood products, wearing apparel, furniture and food products. However, the leather and leather products, footwear, rubber, beverages and paper and paper products divisions registered a negative growth. The value of sales of agroprocessed divisions moderated by,2% in 217:Q3, from a growth of 1,6% recorded in 217:Q2. As a result of the moderate growth, the total nominal value of sales for agroprocessing divisions grew marginally from R , 1 million in the 217:Q2 to R178 87,2 million in 217:Q3. Many agro-processing divisions registered a positive imports growth as compared to exports during. As a result of the relative decrease in the agro-processing divisions exports compared to imports, the trade deficit for agro-processing widened, from R8 16,1 million in the preceding quarter to R12 64,6 million in the current quarter. Despite the increase in the volume of production and value of sales, the agro-processing industry shed about jobs during. The divisions that shed a significant number of jobs were: food products (8 683), leather and leather products (175), textiles (168), rubber products (128), furniture (91) and footwear (3). However, jobs were created in the following divisions: paper and paper products (651), beverages and tobacco (214), wood and wood products (166) and wearing apparel (129). iii

5 1. INTRODUCTION The South African economy moderated by 2,% in 217:Q3 as compared to a 2,8% growth in 217:Q2. The decline in the GDP was driven mainly by the moderate growth in the mining and tertiary sectors, while manufacturing and agriculture grew during 217:Q3, with agriculture being a notable contributor to the GDP (Reserve Bank, 217). This quarterly review is organised as follows: section two summarises the state of the domestic economy. Section three, briefly, provides the impact of the global and domestic economy on the nine divisions of the agro-processing industry. The review in this section articulates how the performance of the global and domestic economy during the 217:Q3 affected the following variables: producer price, production volume, sales, capacity utilisation, trade and employment of each division. 2. STATE OF THE DOMESTIC ECONOMY Table 2.1 below shows the South African economic growth rate at seasonally adjusted annualised rates. During, the real economic growth in South Africa moderated by 2,% following a 2,8% growth recorded in 217:Q2. The notable moderate growth was due to the decline in the tertiary sector. However, activities in the primary and secondary sector expanded during the period (Reserve Bank, 217). The largest contributor to the GDP during the period was as a result of the agricultural sector s increased production in horticulture and field crops. Table 2.1: South African economic growth rate (percentage change at seasonally adjusted annualised rates Sector * Q3 Q4 YEAR Q1 Q2 Q3 Primary sector 3,2-9, -5,4 15,3 14,8 14,9 Agriculture -,2 -,1-7,8 23,1 38,7 44,2 Mining 4,2-11,5-4,7 13,1 8,2 6,6 Secondary sector -2,5-1,8,2-3,3 1,9 2,1 Manufacturing -3,3-3,1,7-3,7 1,5 4,3 Tertiary sector,8 1,6 1,4-2,1 1,1,3 Non-primary sector,1,8 1,1-2,3 1,2,7 Total,4 -,3,3 -,6 2,8 2, Source: Reserve Bank (217) *Percentage change over one year 1

6 % % 28. Figure 2.1: Quarterly unemployment rate Source: Statistics SA (217a) Unemployment data in South Africa is collated and recorded by Statistics SA. During 217: Q3, South Africa s unemployment rate remained steady at 27,7%. When rate includes those who have given up looking for work, the figure grew slightly to 36,8% in 217:Q3 as compared to a 36,6% in 217:Q2. The employment gains observed in the finance and services growth was offset by job losses in manufacturing, construction and agriculture which shed 15 jobs (Stats SA, 217) (see Table 2.1) Figure 2.2: Total CPI and PPI inflation CPI PPI Source: Statistics SA (217b) During, the average consumer and producer price inflation moderated by 4,6% and 4,3% following a 5,2% and 4,5% growth registered in the preceding quarter. Some of the consumer price items that moderated during 217:Q3 were: fish (4,%); milk, eggs and cheese (3,1%), sugar, sweets and deserts (1,2%) and other food (2,5%). Similarly, producer price inflation moderated for fruit and vegetables (7,%), dairy products (1,8%) and bakery 2

7 products (1,4%) (See Figure 2.2). The moderation in prices is mainly as a result of demand slowing down. 3. THE AGRO-PROCESSING INDUSTRY The FAO (1997) defines agro-processing industry as a subset of manufacturing that processes raw materials and intermediate products derived from the agricultural sector. Therefore, the agro-processing industry basically transforms products originating from the agriculture, forestry and fisheries sectors. According to the Standard Industrial Classification, the agroprocessing industry comprises of the following 11 divisions: food products, beverages, tobacco, textiles, wearing apparel, leather and leather products, footwear, paper and paper products, wood and wood products, rubber and furniture. This section reviews the economic performance of nine divisions 1 during, given the global and domestic economic situation during the period. 3.1 TOBACCO Table 3.1 below shows the producer price index for tobacco products. The year-on-year and quarter-to-quarter producer price index of tobacco was 4,6% and 3,1%, respectively in 217:Q3. This indicates that producers continue to receive high prices for tobacco products owing to sustained increase in demand. Table 3.1: Producer price index for tobacco products (base 216 = 1) Indices % change between and and 1,2 11,7 14,8 4,6 3,1 Source: Statistics SA (217c) 1 The Directorate: Agro-processing Support prepares a separate economic review for the food and beverage industry. However, in this report when the overall agro-processing industry s sales, export, import and employment is reported the eleven divisions including the food and beverages are incorporated. 3

8 212: Q3 R million 1,2 Figure 3.1: Quarterly trade balance of tobacco 1, Export Import Source: EasyData 217 The year-on-year exports of tobacco decelerated by 8,4% in 217:Q3 following a contraction of 6,% in 217:Q2. Similarly, imports of tobacco decelerated by 18.8% in 217:Q3 after a contraction of 4,1% in 217:Q2. However, the quarter-to-quarter imports for tobacco rebounded by 2,2% in 217:Q3 from a 3,% contraction recorded in 217:Q2, while exports contracted by 11,6% in 217:Q3 as compared to the 29,2% in 217:Q2. As a result, the trade surplus narrowed from R458.2 million in the second quarter to R363,3 million in (see Figure 3.1). As a consequence of decline in South Africa s production of tobacco, there is shift to rely on imports to satisfy domestic demand. 45, 44, 43, 42, 41, 4, 39, 38, 37, 36, 35, Figure 3.2: Number of formal employment: beverage and tobacco products Source: Statistics SA (217f) During, the quarter-to-quarter formal employment in the beverages and tobacco divisions rebounded by,5% from a 7,4% contraction in 217:Q2, however, it decelerated by 4

9 212: Q3 Index (21 = 1) 3,4% year-on-year. As a result, 214 jobs were created in 217:Q3 (see Figure 3.2.). The number of formal employment in the beverages and tobacco divisions appears to be cyclical in nature; however, the decline in number of jobs is in sync with a decline in output of beverages and tobacco products in 217:Q TEXTILES Table 3.2 presents the producer price index for textiles during. The year-on-year and quarter-to quarter producer price index for textiles registered a positive growth of 4,6% and 3,%, respectively. Producers prices increased, which is a mark of continues increase in demand for textiles products. Table 3.2: Producer price index for textiles (base 216=1) Indices % change between and and Textile 1,2 11,7 14,8 4,6 3, Source: Statistics SA (217a) The quarter-to-quarter seasonally adjusted physical volume of production for other textiles division rebounded by 3,3% in 217:Q3 from a,1% contraction in 217:Q2. However, other textiles, registered an improved negative growth of 1,4% in 217:Q3 from 4,4% contraction in 217:Q2 year-on-year (see Figure 3.3 below). The whole textiles industry moderated by 3,1% quarter-to-quarter. The moderate in growth in seasonally adjusted physical volume of production is in line with a slowdown in demand for textile products in 217:Q Figure 3.3: Seasonally adjusted physical volume of production: textiles Textiles Other textile products Source: Statistics SA (217d) 5

10 212: Q3 R million The quarter-to-quarter seasonally adjusted physical volume of production for the textiles division moderated by 2,9% in 217:Q3 following a contraction of 3,6% in the 217:Q2. While the year-on-year seasonally adjusted physical volume of production for textiles increased modestly by 5,5% in 217:Q3 following a growth of 4,6% in the preceding quarter. Table 3.3: Utilisation and reasons for underutilisation of production capacity by large enterprises: Textiles (percentage) Period Utilisation Reasons for underutilisation Total underutilis ation Shortage of Raw materials Labour Skilled Semi- and unskilled Insufficient demand Other 67,8 32,3 1,7 1,, 26,3 3,2 65,5 34,5 1,6,5, 29,2 3,2 64,9 35,1 1,6,6,1 29,6 3,2 Source: Statistics SA (217e) Table 3.3 shows that the utilisation of production capacity by large enterprises in the textiles division moderated year-on-year and quarter-to-quarter. Insufficient demand was the main reason for the underutilisation of production capacity by large enterprises of textiles in the period under review, followed by other reasons such as lower productivity. Figure 3.4: Seasonally adjusted value of sales (current prices): textiles 4, 3,5 3, 2,5 2, 1,5 1, 5 Textiles Other textile products Source: Statistics SA (217d) During, the quarter-to-quarter and year-on-year physically adjusted value of sales for textiles moderated by 2,1% and 3,4% as compared to a 2,8% and 5,% growth registered in 217:Q3. On the other hand, the quarter-to-quarter and year-on-year physically adjusted value of sales for other textiles rebounded by 7,8% and 3,5% in 217:Q3 following a,9% and 6

11 212: Q3 R million 3,4% respective contraction in the last quarter (see Figure 3.4). The textiles industry sales, combined grew by 5,7% quarter-to-quarter. Though there is a slowdown in sales of textiles products as a consequence of moderation in demand, other textile products appear to be increasing in sales as a result of an upward demand trend. 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Figure 3.5: Quarterly trade balance of textiles Export Import Source: Quantec EasyData (217) Figure 3.5 shows the quarterly trade balance of the textiles division during. The yearon-year imports and exports of textiles grew by 6,8% and 7,% in 217:Q3 from 3,3% and 4,% growth in 217:Q2, respectively. On the other hand, the quarter-to-quarter imports grew substantially by 14,8% in 217:Q3 following a 4,1% growth in the last quarter. As a result, the trade deficit of the textile division widened to R million in from R2 397,2 million registered in the last quarter. Irrespective of an improvement in the production of textiles in 217:Q3, which saw an increase in South Africa s exports, there is still a huge dependence on imports to meet South African demand. 25, Figure 3.6: Number of formal employment: textiles 2, 15, 1, 5, Preparation and spinning of textile fibres; weaving of textiles Other textiles Source: Statistics SA (217f) 7

12 The quarter-to-quarter number of formal employment for other textiles contracted by,8% in 217:Q3 from a,4% growth in 217:Q2, however, it decelerated by 1,% year-on-year. Conversely, the quarter-to-quarter employment in the preparation and spinning of the textile fibres division rebounded by,1% in 217:Q3 following a,2% contraction in the last quarter and moderated by 3,5% year-on-year. As a result, a total of 168 jobs were lost in the textiles division in 217:Q3 (see Figure 3.6). The increment in imports of textile could likely be the reason for jobs shed, though the number of job lost appears to be insignificant. Table 3.4: Net balance of the BER manufacturing survey: Textiles 217: Q4* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received General business conditions Number of factory workers Fixed investment Business confidence Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time Expected business conditions in 12 months time *Expected Source: BER (217) Table 3.4 presents the manufacturing survey of the textile division conducted by BER during. The year-on-year outlook for 217: Q4 for most of the variables are positive, except for fixed investments. 8

13 212: Q3 Index (21 = 1) 3.3 WEARING APPAREL Table 3.5 shows that during, the year-on-year and quarter-to-quarter producer price index for wearing apparel grew by 3,5% and,3%, respectively. Prices received by producers for wearing apparel continue to increase, which is likely stimulated by positive consumer demand. Table 3.5: Producer price index for wearing apparel (base 216= 1) Indices % change between and and Source: Statistics SA (217c) Domestic output Wearing apparel 99,7 12,9 13,2 3,5, Figure 3.7: Seasonally adjusted physical volume of production: wearing apparel Wearing apparel Knitted, crocheted articles Source: Statistics SA (217d) Figure 3.7 shows the year-on-year physical volume of production for wearing apparel and knitted or crocheted fabrics. The quarter-to-quarter and year-on-year physical volume of production for knitted or crocheted fabrics rebounded by 11,3% and 6,8% in 217:Q3 as compared to a contraction of 4,2% and 7,6% in 217:Q2, respectively. On the other hand, the quarter-to-quarter physical volume of production for wearing apparel rebounded by,2% in 217:Q3, following a decline of 1,7% in 217:Q2, however, it decelerated by 9,1% year-on-year. The wearing apparel industry rebounded by 5,9% quarter-to-quarter. The rebound in volume of production is likely due to an increase in producer prices, this could have been a catalyst in increasing production. 9

14 212: Q3 R million Table 3.6: Utilisation and reasons for underutilisation of production capacity by large enterprises: Wearing apparel (percentage) Period Utilisation Reasons for underutilisation Total underutili sation Shortage of Raw materials Labour Skilled Semi and unskilled Insufficient demand Other 77,2 22,8,6 1,4,4 17, 3,5 75,2 24,5 1,6 1,5,4 18,2 3,9 75,2 24,8,6 1,4,4 18,8 3,6 Source: Statistics SA (217e) Table 3.6 shows that the utilisation of production capacity by large enterprises in the wearing apparel division moderated year-on-year, but stagnated quarter-to-quarter. Insufficient demand remained the key reason behind low capacity utilisation, followed by other reasons such as lower productivity. 6, 5, 4, 3, 2, 1, Figure 3.8: Seasonally adjusted value of sales (current prices): wearing apparel Wearing apparel Knitted, crocheted articles Source: Statistics SA (217d) Figure 3.8 shows the quarter-to-quarter value of sales for knitted or crocheted fabrics and wearing apparel rebounded by 8,7% and 2,7% in 217:Q3, respectively from a,2% and 2,6% contraction recorded in 217:Q2. However, during 217:Q3 the year-on-year value of sales for knitted or crocheted fabrics accelerated by 12,1%, while wearing apparel decelerated by 5,1% from a 3,4% contraction in the last quarter. The wearing apparel industry rebounded by 3,4% quarter-to-quarter, likely as a resultant of an increase in demand. 1

15 212: Q3 R million 9, 8, 7, 6, 5, 4, 3, 2, 1, Figure 3.9: Quarterly trade balance of wearing apparel Export Import Source: Quantec EasyData (217) Figure 3.9 shows the quarterly trade balance for the wearing apparel division. The quarter-toquarter imports for wearing apparel rebounded by 12,6% in 217:Q3 from 9,% contraction in 217:Q2, however, it registered an improved negative growth of 5,6% in 217:Q3 following a 6,9% contraction in 217:Q2 year-on-year. On the other hand, the quarter-to-quarter exports of wearing apparel contracted by,3% in 217:Q3 as compared to 3,5% growth in 217:Q2, but decelerated by 3,% year-on-year. As a result, the trade deficit of the wearing apparel division widened from R3 99,7 million in 217:Q2 to R4 736,9 million in 217:Q3. Noting a rebound in South African production of wearing apparel, it was, however, not sufficient to meet the demand hence a widening gap in trade deficit. 5, 45, 4, 35, 3, 25, 2, 15, 1, 5, Figure 3.9: Number of formal employment: wearing apparel Wearing apparel, except fur;dressing and dying of fur, articles of fur Knitted and crocheted fabrics and articles Source: Statistics SA (217f) 11

16 During, the quarter-to-quarter formal employment for knitted and crocheted fabric and articles and wearing apparel rebounded by 2,2% and,1% as compared to a contraction of 6,4% and 8.3% in 217:Q2, respectively. On the other hand, the year-on-year formal employment for knitted and crocheted fabric and articles and wearing apparel decelerated by 4,3% and 11,5% in 217:Q3 from a contraction of 1,6% and 9,8% in, respectively. As a result, 129 jobs were created in the wearing apparel division, which is in accordance with a rebound in its output (see Figure 3.9). Table 3.7: Net balance of the BER manufacturing survey: Clothing 217: Q4* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received General business conditions Number of factory workers Fixed investment Business confidence Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time Expected business conditions in 12 months time *Expected Source: BER (217) Table 3.7 presents the manufacturing survey of the clothing division conducted by BER during. The year-on-year outlook shows that most variables are expected to decrease, except for fixed investments. 12

17 212: Q3 Index (21 = 1) 3.4 LEATHER AND LEATHER PRODUCTS Figure 3.1: Seasonally adjusted physical volume of production: leather and leather products Source: Statistics SA (217d) The year-on-year seasonally adjusted physical volume of production for leather and leather products registered an improved negative growth of 7,4% in 217:Q3 as compared to a 9,% contraction in 217:Q2, however, the quarter-to-quarter physical volume of production decelerated by 5,8% in 217:Q3 from 2,1% recorded in 217:Q2 (see Figure 3.1). The decline, among other factors, has been as a result of low demand. Table 3.8: Utilisation and reasons for underutilisation of production capacity by large enterprises: Leather and leather products (percentage) Period Utilisation Reasons for underutilisation Total underutilis ation Raw materials Shortage of Labour Skilled Semi and unskilled Insufficient demand Other 71,8 28,5 5,5,6 1,3 19,4 1,3 71,8 28,2 5,5,6 1,3 18,7 2,1 7,5 29,5 4,,6 1,2 21,6 2,1 Source: Statistics SA (217e) The utilisation of production capacity by large enterprises in the leather and leather products division moderated quarter-to-quarter and year-on-year. Among the reasons for underutilisation, insufficient demand remained the main reason, followed by shortage of raw materials. 13

18 212: Q3 R million 212: Q3 R million 2, 1,8 1,6 1,4 1,2 1, Figure 3.11: Seasonally adjusted value of sales (current prices): leather and leather products Source: Statistics SA (217d) The quarter-to-quarter seasonally adjusted value of sales for the leather and leather products division moderated by 1,5% in 217:Q3 following a 2,% growth in 217:Q2. However, the year-on-year seasonally adjusted value of sales for leather and leather products rebounded by 5,% in 217:Q3 from a,4% contraction recorded in 217:Q2 (see Figure 3.11). In line with a decline in output of leather and leather products, sales moderated quarter to quarter. 3,5 3, 2,5 2, 1,5 1, 5 Figure 3.12: Quarterly trade balance of leather and leather products Export Import Source: Quantec EasyData (217) Figure 3.12 presents the quarterly trade balance of leather and leather products division. During 217:Q3, the year-on-year imports and exports of leather and leather products decelerated by 9,7% and 1,7% from a contraction of 4,2% and,7% in 217:Q2, respectively. However, the quarter-to-quarter exports contracted by 7,3% in 217:Q3 from 26,2% growth in 217:Q2, while imports rebounded by 9,2% in 217:Q3 as compared to 2,6% contraction recorded in 217:Q2. As a result, the trade deficit widened by R1 376, million in 217:Q3 from 14

19 R1 75,2 million in 217:Q2. A decline in South African production of leather and leather products contributed to an increase in trade deficit. 6, Figure 3.13: Number of formal employment: leather and leather products 5,5 5, 4,5 4, 3,5 3, Source: Statistics SA (217f) During 217:Q3, the quarter-to-quarter and year-on-year formal employment in the leather and leather products division contracted by 3,2% and,4% following a growth of 2,1% and 4,% in 217:Q2, respectively. As a result, 175 jobs were shed in for the division following a decline in production (see Figure 3.13). 3.5 FOOTWEAR The year-on-year and quarter-to-quarter producer price index of footwear for domestic output registered a positive growth of 8,1 % and 4,4%, respectively during (see Table 3.9). The increase in price of footwear is likely a as consequence of growing demand. Table 3.9: Producer price index for footwear (base 216 = 1) Indices % change between and and Domestic output 1,1 13,6 18,2 8,1 4,4 Source: Statistics SA (217c) 15

20 212: Q3 Index (21 = 1) Figure 3.14: Seasonally adjusted physical volume of production: footwear Source: Statistics SA (217d) The year-on-year seasonally adjusted physical volume of production for footwear division decelerated by 13,8% during from a contraction of 7,8% registered in 217:Q2. However, the quarter-to-quarter seasonally adjusted physical volume of production for footwear products registered an improved negative growth of 4,6% in 217:Q3 from 9,8% contraction in 217:Q2 (see Figure 3.14). The improvement in quarter-to-quarter growth could be emanating from upward growth trend in prices of footwear. Table 3.1: Utilisation and reasons for underutilisation of production capacity by large enterprises: Footwear (percentage) Period Utilisation Reasons for underutilisation Total underutilis ation Shortage of Raw materials Labour Skilled Semi and unskilled Insufficient demand Other 85,5 14,5 1,9,, 11,6, 81,1 18,9 1,9,, 15, 1,1 84,3 15,7 2,6,, 12,4, Source: Statistics SA (217e) During, the utilisation of production capacity by large enterprises in the footwear division moderated year-on-year, however, it increased modestly quarter-to-quarter. Insufficient demand remains the main reason behind low capacity utilisation, followed by shortage of raw materials (see Table 3.1). 16

21 212: Q3 R million 212: Q3 R million Figure 3.15: Seasonally adjusted value of sales (current prices): footwear 1,8 1,6 1,4 1,2 1, Source: Statistics SA (217d) The year-on-year seasonally adjusted value of sales for the footwear division decelerated by 3,9% in 217:Q3 following a contraction of 3,3% in 217:Q2. Likewise, with improvement in production of footwear, sales registered a quarter-to-quarter improved negative growth of,9% in 217:Q3 as compared to a 13,5% contraction in 217:Q2 (see Figure 3.15). Figure 3.16: Quarterly trade balance of footwear 2,5 2, 1,5 1, 5 Export Import Source: Quantec EasyData (217) During, the quarter-to-quarter footwear division imports grew modestly by 3,5% from,1% growth in 217:Q2, however, it decelerated by 1,2% year-on-year as compared to a contraction of 3,5% in 217:Q2 (see Figure 3.16). Exports moderated by 1,7% quarter-toquarter in 217:Q3 following an 18,1% growth in 217:Q2, however, contracted by 4,2% yearon-year in 217:Q3. As a result, the trade deficit widened from R1 155, million previously to 17

22 R1 2,9 million in the current year. Footwear division is heavily dependent on imports to sustain domestic demand. 1 Figure 3.17: Number of formal employment: Footwear Footwear Source: Statistics SA (217f) The quarter-to-quarter formal employment in the footwear division contracted by,3% in 217:Q3 following a,6% growth registered in 217:Q2, however, it grew modestly by 8,3% year-on-year in 217:Q3 as compared to a 6,3% growth 217:Q2. As a result of the decline in the growth of footwear division, 3 jobs were shed in the division during the quarter (see Figure 3.17). 3.6 WOOD AND WOOD PRODUCTS The year-on-year and quarter-to-quarter producer price for domestic output of wood and paper products registered a positive growth of 7,8% and 2,6%, respectively during 217:Q3 (see Table 3.11). Producers continue to enjoy substantial year-on-year high prices increases owing to growing demand of wood and wood products. Table 3.11: Producer price index for wood and paper products division (base 216 = 1) Indices % change between and and Domestic output 97,2 12,1 14,8 7,8 2,6 Source: Statistics SA (217c) 18

23 212: Q3 Index (21 = 1) Figure 3.18: Seasonally adjusted physical volume of production: wood and wood products Sawmilling and planing of wood Products of wood Source: Quantec EasyData (217) During 217:Q3 the quarter-to-quarter physical volume of production for products of wood and sawmilling and planing of woods moderated by 1,3% and 1,1% as compared to the growth of 3,% and,5% in 217:Q2, respectively. On the other hand, the year-on-year products of wood registered an improved negative growth of,3% in 217:Q3 from a 3,% in 217:Q2 and sawmilling and planning of wood rebounded by 1,5% in 217:Q3 (see Figure 3.18). The growth in volume of production, although in moderation, could be likened to continuous increase in producer prices. Table 3.12: Utilisation and reasons for underutilisation of production capacity by large enterprises: Wood and wood products (percentage) Period Utilisation Reasons for underutilisation Total underutilisation Shortage of Raw materials Skilled Labour Semi and unskilled Insufficient demand Other 88,3 11,7,6 1,2,1 4,6 5,3 86,8 13,2,7 1,1, 5,9 5,5 87,1 12,9,5 1,4, 6,1 4,8 Source: Quantec EasyData (217) Table 3.12 shows utilisation of production capacity by large enterprises in the wood and wood division. The utilisation of production capacity moderated year-on-year and grew marginally quarter-to-quarter. During the period, the insufficient demand remained a reason for underutilisation followed by other reasons such as lower productivity. 19

24 212: Q3 R million 212: Q3 R million 6, 5, Figure 3.19: Seasonally adjusted value of sales (current prices): wood and wood products 4, 3, 2, 1, Sawmilling and planing of wood Products of wood Source: Statistics SA (217d) The quarter-to-quarter sawmilling and planing of wood rebounded by 2,2% in 217:Q3 from a 2,6% contraction 217:Q2. However, year-on-year, sales for sawmilling and planing woods moderated by,4% in 217:Q3. Conversely, products of wood rebounded by 2,2% quarterto-quarter in 217:Q3 following a 2,6% growth in the last quarter, but moderated by,8% year-on-year during 217:Q3 (see Figure 3.19). The whole division moderated by,4% quarterto-quarter in 217:Q3, indicating a slowing down of demand. 2, 1,8 1,6 1,4 1,2 1, Figure 3.2: Quarterly trade balance of wood and wood products Export Import Source: Quantec Easy Data (217) During 217:Q3 the quarter-to-quarter and year-on-year imports and exports of wood and wood products rebounded by 3,4% and 8,2% from a contraction of 8,6% and 4,5% in 217:Q2, respectively. However, the quarter-to-quarter exports of wood moderated by 4,2% in 217:Q3 as compared to a 7,2% growth in 217:Q2, but registered an improved negative 2

25 growth of 3,% in 217:Q3 from 3,5% in 217:Q2 year-on-year. As a result, the trade surplus widened from R524,6 million in the previous quarter to R555,7 million in the period under review (see Figure 3.2). This is an indication of an increased in International demand for South African wood and wood products. 3, 28, 26, 24, 22, 2, 18, 16, 14, 12, 1, Figure 3.21: Number of formal employment: wood and wood products Sawmilling and planing of wood wood and wood podcucts Source: Statistics SA (217f) The quarter-to-quarter formal employment of wood and wood products remained unchanged in 217:Q3 following a 5,1% contraction in 217:Q2. Conversely, the quarter-toquarter formal employment of sawmilling and planning of wood rebounded by,1% in 217:Q3 from 1,4% growth in 217:Q2. On the other hand, during 217:Q3 the year-on-year and formal employment of wood and wood products and sawmilling and planning of wood registered an improved negative growth of 5,% and 2,9% following a 8,7% and 3,3% contraction in 217:Q2. As a result, the wood and wood products and sawmilling and planning of wood divisions combined created 166 jobs in 217:Q3 in accordance with an increase in exports (see Figure 3.21). Table 3.13: Net balance of the BER manufacturing survey: Wood and wood products 217:Q4* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received

26 217:Q4* General business conditions Number of factory workers Fixed investment Business confidence 35 Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time Expected business conditions in 12 months time *Expected Source: BER (217) Table 3.13 presents the manufacturing survey of the wood and wood products division by BER during. The year-on-year outlook for 217: Q4 is negative for most variables while employment remains unchanged. 3.7 PAPER AND PRINTED PRODUCTS The producer price for domestic output of paper and printed products grew year-on-year and quarter-to-quarter by 8,% and 2,8%, respectively during (see Table 3.14). This shows that there is upward trend in demand for paper and printed products. Table 3.14: Producer price index for paper and printed products (base 216 = 1) Indices % change between and and Domestic output Paper and paper products 97,2 12,1 14,9 8, 2,8 Source: Statistics SA (217c) 22

27 212: Q3 Index (21 = 1) Figure 3.22: Seasonally adjusted physical volume of production: paper and paper products Source: Statistics SA (217d) The quarter-to-quarter and year-on-year physical volume of production for the paper and paper products division contracted by 2,5% and 6,2% in 217:Q3 from a contraction of 1,9% and 2,% in 217:Q2, respectively (see Figure 3.22). The volume of production appears be even overtime, but varies in respect to fluctuation in demand patterns. Table 3.15: Utilisation and reasons for underutilisation of production capacity by large enterprises: Paper and paper products (percentage) Period Utilisation Reasons for underutilisation Total underutilisati on Raw materials Shortage of Skilled Labour Semi and unskilled Insufficient demand Other 88,3 11,7,6 1,2,1 4,6 5,3 86,8 13,2,7 1,1, 5,9 5,5 87,1 12,9,5 1,4, 6,1 4,8 Source: Statistics SA 217 Table 3.15 shows utilisation of production capacity by large enterprises in the paper and paper division of the agro-processing sector. Utilisation of production capacity moderated year-on-year and grew marginally quarter-to-quarter. Insufficient demand remained the main reason for underutilisation followed by other reasons such as seasonal factors. 23

28 212: Q3 R million 212: Q3 R million 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, Figure 3.23: Seasonally adjusted value of sales (current prices): paper and paper products Source: Statistics SA (217d) During, the quarter-to-quarter value of sales for the paper and paper products division contracted by,7% compared with a growth of,8% in 217:Q2. Conversely, it moderated by 1,% year-on-year as compared to a 4,7% registered in the last quarter (see Figure 3.23). Similar to volume of production, sales portray an even growth trend, which indicates slightly constant demand. 7, 6, 5, 4, 3, 2, 1, Figure 3.24: Quarterly trade balance of paper and paper products Export Import Source: Quantec EasyData (217) The quarter-to-quarter and year-on-year exports of the paper and paper products division decelerated by 2,4% and 1,4% in 217:Q3 following a 2,% and 1,6% contraction in 217:Q2, respectively. On the other hand, the quarter-to-quarter imports of paper and paper products rebounded by 15,% in 217:Q3 from a 5,% contraction in 217:Q2. It, however, registered an improved negative growth of 8,7% year-on-year in 217:Q3. As a result, the trade surplus 24

29 narrowed from R1 675,4 million in 217:Q2 to R945, million during 217:Q3, showing a slowdown in demand for South African exports (see Figure 3.24). Figure 3.25: Number of formal employment: paper and paper products 45, 43, 41, 39, 37, 35, 33, 31, 29, 27, 25, Source: Quantec EasyData (217) The quarter-to-quarter and year-on-year formal employment in the paper and paper products division rebounded by 1,8% and 1,5% in 217:Q3 following a growth of,1% and,1% in 217:Q2, respectively. As a result, 651 jobs were created in the current quarter (see Figure 3.25). Table 3.16: Net balance of the BER manufacturing survey: Paper and paper products 217:Q4* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received General business conditions Number of factory workers Fixed investment

30 Business confidence Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time Expected business conditions in 12 months time *Expected Source: BER (217) Table 3.16 shows the manufacturing survey of the paper and paper products division by BER during. The year-on-year outlook for 217: Q4 is negative for most variables except for fixed investments. 3.8 RUBBER PRODUCTS The quarter-to-quarter and year-on-year producer price for domestic output of rubber and plastic products registered a positive growth of 3,2% and,5%, respectively, in 217Q3 (see Table 4.17). This indicates, likely, a growing demand, albeit at a slower rate. Table 3.17: Producer price index for rubber products (base 216 = 1) Indices % change between and and Domestic output Rubber products 11,7 1, 1,8 3,2,5 Source: Statistics SA (217c) 26

31 212: Q3 Index (21 = 1) Figure 3.25: Seasonally adjusted physical volume of production: rubber products Source: Statistics SA (217d) The quarter-to-quarter and year-on-year physical volume of production for rubber products contracted by 3,9% and 1, % in following a growth of 2,4% and 3,% in 217:Q2, respectively (see Figure 4.25). This is in sync with demand growing at a slower pace. Table 3.18: Utilisation and reasons for underutilisation of production capacity by large enterprises: Rubber products (percentage) Period Utilisation Reasons for underutilisation Total underutilisati on Shortage of Raw materials Skilled Labour Semi and unskilled Insufficient demand Other 84,7 15,3,5,9, 11,9 2, 83,7 16,3,3 2,7, 11,4 2, 83,7 16,3,3 3,7, 1,4 2, Source: Statistics SA As depicted in Table 3.18, the year-on-year utilisation of production capacity by large enterprises in the rubber products division declined year-on-year, however, it stagnated quarter-to-quarter. Insufficient demand remains the main reason for underutilisation, followed by shortage of skilled labour. 27

32 212: Q3 R million 212: Q3 R million Figure 3.26: Seasonally adjusted value of sales (current prices): rubber products 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Source: Statistics SA (217d) The quarter-to-quarter and year-on-year value of sales in the rubber products division contracted by 3,% and,1% in 217:Q3 from 2,8% and 4,% in 217:Q2, respectively (see Figure 3.26). The sales depict uniform trend overtime; indicate an even demand of rubber products. 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Figure 3.27: Quarterly trade balance of rubber products Export import Source: Statistics SA (217) The quarter-to-quarter exports of the rubber products division moderated by 5,1% in 217:Q3 from a 1,3% growth in 217:Q2, however, it decelerated year-on-year by 4,4% in 217:Q3 as compared to a 4,2% contraction in 217:Q2. On the other hand, the quarter-to-quarter imports of the rubber products division accelerated by 9,4% in 217:Q3 from 1,3% growth in 217:Q2, but contracted by 3,6% year-on-year (see Figure 3.27). As a result, the trade deficit 28

33 widened from R4 75,2 million in the previous quarter to R5 327,5 million in. Local demand of rubber products is highly reliant on imports. 13, Figure 3.29: Number of formal employment: rubber products 12,5 12, 11,5 11, 1,5 1, Source: Statistics SA (217e) The quarter-to-quarter formal employment in the rubber products division contracted by,1% in 217:Q3 following a 9,4% growth registered in 217:Q2 (see Figure 3.29), however, it moderated year-on-year by 8,1% in 217:Q3 from a 8,8% growth in 217:Q2. As a result, 128 jobs were shed in the rubber products division in 217:Q3. While the jobs lost appear to be insignificant, a further increase in imports could see the trend worsen. 3.9 FURNITURE The producer price for domestic output of furniture and other manufacturing registered a positive growth of 5,5% year-on-year, while it declined by,3% quarter-to-quarter during 217:Q3 showing a sign of slowing demand (see Table 3.19). Table 3.19: Producer price index for furniture and other manufacturing (Base 216=1) Indices % change between and and Domestic output 1,3 1,2 11,7 5,5 -,3 Source: Statistics SA (217e) 29

34 212: Q3 Index (21 = 1) Figure 3.28: Seasonally adjusted physical volume of production: furniture Source: Statistics SA (217d) The quarter-to-quarter physical volume of production for the furniture division rebounded by,2% in 217:Q3 following a contraction of 6,1% recorded in 217:Q2. However, given a slowing demand, the year-on-year physical volume of production for furniture products contracted by 3,2% in 217:Q3 as compared to a 2,6% growth in 217:Q2 (see figure 3.28). Table 3.2: Utilisation and reasons for underutilisation of production capacity by large enterprises: Furniture (percentage) Period Utilisation Reasons for underutilisation Total underutilisati on Shortage of Raw materials Skilled Labour Semi and unskilled Insufficient demand Other 8,2 19,8 1,3 1,3 1,5 15,7, 84,9 15,1,8, 1,5 12,8, 8,.7 1,.3,8, 1,5 11,1, Source: Statistics SA (217f) Utilisation of production capacity by large enterprises in the furniture division increased modestly year-on-year, however, marginally quarter-to-quarter (see Table 3.2). Insufficient demand remained the main reasons for underutilisation of production capacity followed by shortage of semi- and unskilled labour. 3

35 212: Q3 R million 212: Q3 R million 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Figure 3.29: Seasonally adjusted value of sales (current prices): furniture Source: Statistics SA (217d) The quarter-to-quarter seasonally adjusted value sales for the furniture division rebounded by 3,4% in 217:Q3 from a 3,6% contraction in 217:Q2. However, as demand slowdown, it moderated by 4,% in 217:Q3 year-on-year as compared to a 6,% growth in 217:Q2 (see Figure 3.29). 2,5 Figure 3.3: Quarterly trade balance of furniture 2, 1,5 1, 5 Export Import Source: Quantec EasyData (217) The quarter-to-quarter exports of the furniture division moderated by 4,9% in 217:Q3 following a growth of 2,% in 217:Q2, however, it decelerated year-on-year by 12,% in 217:Q3 as compared to an 11,% contraction recorded in 217:Q2. Quarter-to-quarter imports of the furniture division on the other hand grew modestly by 14,1% in 217:Q3 from 6,7% in 217:Q2, however, during 217:Q3, it registered year-on-year improved negative growth of 4,% as compared to 5,2% in 217:Q2 (see Figure 3.3). As a result, the trade deficit 31

36 widened from R759, million in 217:Q2 to R96,3 million in 217:Q3 owing to strong demand in imports. 4, 35, 3, 25, 2, 15, 1, 5, Figure 3.31: Number of formal employment: furniture Source: Statistics SA (217d) Resultant to a slightly decline in output of furniture, the quarter-to-quarter formal employment in the furniture division contracted by,3% in 217:Q3 following a 1,6% growth in 217:Q2. However, it grew marginally by 2,1% year-on-year as compared to a,1% growth previously. As a result, 91 jobs were shed in the furniture division during (see Figure 3.31). Table 3.21: Net balance of BER manufacturing survey: Furniture 217:Q4* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received General business conditions Number of factory workers Fixed investment

37 Business confidence 19 5 Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time Expected business conditions in 12 months time *Expected Source: BER (217) Table 3.21 shows the manufacturing survey of the furniture division by BER during 217:Q3. The year-on-year outlook for 217: Q4 is positive for most variables except for the domestic order volumes received, general business conditions and employment. 4. CONCLUSION During 217:Q3, the South African economy moderated due to a slowdown in global economic growth. However, some agro-processing divisions remained resilient, with textiles, wood and wood products, wearing apparel, furniture and food products registering a positive growth in volume of production. But leather and leather products, footwear, rubber, beverages and paper and paper products registered a negative growth. The value of sales of the agro-processing divisions moderated by,2% in 217:Q3, from a growth of 1,6% recorded in 217:Q2. As a result of the moderate growth, the total nominal value of sales for the agro-processing products divisions grew marginally from R ,1 million in 217:Q2 to R178 87,2 million in 217:Q3. As a consequence of many agro-processing divisions registering positive imports growth as compared to exports during. As a result of the relative decrease in the agroprocessing divisions exports compared to imports, the trade deficit for agro-processing widened from R8 16,1 million in the preceding quarter to R12 64,6 million in 217:Q3. During, the agro-processing industry shed about formal jobs. The divisions that shed a significant number of jobs were: food products, leather and leather products, textiles, rubber products, furniture and footwear. However, jobs were created in the following divisions: paper and paper products, beverages and tobacco, wood and wood products and wearing apparel. 33

38 References BER (217), Manufacturing Survey. Bureau for Economic Research, University of Stellenbosch. FAO (1997), The State of Food and Agriculture. Rome: Food and Agriculture Organization. IMF (217), World Economic Outlook, Update. International Monetary Fund. Quantec EasyData (217), RSA International Trade. Accessed in September 217. Reserve Bank (217), Quarterly Bulletin, September 217. South African Reserve Bank. Statistics SA (217a), Quarterly Labour Force Survey, various issues. Statistics South Africa. Statistics SA (217b), Consumer Price Index, various issues. Statistics South Africa. Statistics SA (217c), Producer Price Index, various issues. Statistics South Africa. Statistics SA (217d), Manufacturing: Production and Sales, various issues. Statistics South Africa. Statistics SA (217e), Manufacturing: Utilisation of Production Capacity by Large Enterprises. Statistics South Africa. Statistics SA (217f), Quarterly Employment Statistics, various issues. Statistics South Africa. UNIDO (217), World Manufacturing Production, Statistics for Quarter 3, 217, Statistics Unit, United Nations Industrial Development Organisation. 34

39 NOTES: 35

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