Main bulletin: The Real Economy Bulletin - First Quarter 2016

In this edition:

Production and sales: The first quarter of 2016 was marked by a contraction in GDP, with the economy reported as shrinking by 0,3%, or 1,2% on an annualised basis. The immediate cause of the downturn was a 4,9% quarterly decline (equal to 18% in annualised terms) in mining and a 1,7% fall (or 6,5% at an annual rate) in agriculture. These contractions had a particularly sharp impact on overall growth because of a longer-term slowdown in growth in manufacturing and, to a lesser extent, the rest of the economy, which dates back to around 2013. Read more.

Employment:  In year-on-year terms, employment in the real economy contracted by 2,6%. In agriculture it reportedly shrunk by 1,7% and in manufacturing by 7,9%, while construction saw an increase of 3%. In the rest of the economy, employment expanded by 3%. In mining, using the employer survey (which is considered more reliable for this sector), employment fell by 5.9% from the last quarter of 2014 to the last quarter of 2015. Read more.

Trends in trade: The year to the first quarter of 2016 saw a continued contraction in exports for both manufacturing and mining in dollar terms. In contrast, in constant rand both sectors saw growth, with manufacturing expanding by 4,6% and mining by 0,9%. Despite the drought, agriculture witnessed only a relatively mild dollar contraction of 6,5% and strong rand-denominated growth of 19%. Read more.

Profitability and investment: Profitability among all sectors of the economy declined in the final quarter of 2015. The mining sector continued to post losses, as it did throughout 2015, with fourth quarter losses almost doubling over the previous quarter. While manufacturing remained profitable overall, its profits also continued to decline, following a negative path that began in 2011. For the economy as a whole, the investment rate dropped sharply, but it rose slightly in manufacturing. Read more.

Behind the trends: A number of long-term factors continued to act as a drag on the South Africa economy, key among them being the depressed global economy, weak commodity prices, and the impact of the drought. These factors have been aggravated by pro-cyclical fiscal and monetary policies. Read more.

Fiscal pressure on industrial policy programmes: The 2016/17-2018/19 Medium Term Expenditure Framework (MTEF) is the product of a difficult economic climate. As a slowing global economy and depressed commodity prices put pressure on the budget, key government departments will have to grapple with the dual challenge of constrained fiscal conditions and the ever more pressing need to boost economic growth. One result is a cut in the Department of Trade and Industry’s (the dti’s) budget in nominal terms, with a particularly sharp impact on incentives for business. Read more.

Briefing note - The crisis in the steel industry:  The crisis in the steel industry is evident through a number of measures. Steel production declined by 15% from 2010 to 2015, for a total fall of 33% from 2008. In dollar terms, steel exports fell by 32% from 2010 to 2015, and ferro-alloys dropped by 24%. Profitability in the steel value chain shrank quickly from 2010 to 2014, with basic iron and steel posting losses for most of the past five years. The losses sparked a run of closures, with the number of foundries in South Africa declining from 140 in 2009 to 95 in 2014, and key ferro-alloy producers Evraz Highveld and Samancor forced into major restructuring. Iron and steel refining shed 30 000 jobs between 2011 and 2015, with ferro-alloy producers applying for a further 3 000 retrenchments in the first quarter of 2016 alone. Read the summary note or full briefing note A strategic response to the crisis in the steel industry.

This paper argues that the dramatic changes in the trade architecture of the world during the first decade of the new millennium have created both opportunities and challenges for Africa’s development. African countries need to develop proactive strategies to harness these new changes and use them to advance the integration of the African continent.

The paper looks at the main elements of the changes in the global trade architecture in the first decade of the new millennium. It then explains how these changes impacted on the Doha Development Round. The shift to mega-regionals and mega-bilaterals by the major developed country players and the implications of these developments for Africa’s trade with the world are also briefly discussed. The paper then sets out the changes in the trade policies of the EU and the US on Africa in the new millennium and the implications of these policies for Africa’s economic development. The paper also discusses the role of China in the trade and economic development of Africa and looks at the unfolding regional integration strategy of African countries. 

See Commonwealth Trade Hope Topics Series Issue 131 The changing global trade architecture: Implications for Sub-Saharan Africa's development

Faizel Ismail is Adjunct Professor in the School of Economics, University of Cape Town and a TIPS Research Fellow

BusinessTech 18 May 2016

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Business Report - 18 may 2016

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The New Age - 17 May 2016

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The latest Quarterly Labour Force Survey (QLFS) reported that the country lost a total of 355 000 jobs from the last quarter of 2015 to the first quarter of 2016, for an astonishing 2,2% decline in a single quarter. But the figures seem unreliable, due at least in part to the shift to a new master sample. The data likely reflect an effective correction to overestimates of job creation in the previous four quarters, rather than a sharp contraction in the real world. Year on year, employment reportedly rose by 204 000 or 1,3%, which is essentially in line with previous years and with expected GDP growth.

A new policy brief by Neva Makgetla, TIPS Programme Manager: Trade and Industry, unpacks the figures. While it is likely that employment creation has been affected by the broader economic slowdown, the sharp job losses reported for the first quarter of 2016 seem highly unlikely.

The jobs bloodbath that wasn’t:  What happened to employment in  the first quarter of 2016?

Business Day - 09 May 2016

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Engineering News - 09 May 2016

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TOPIC: PRESENTATION OF THE LATEST QUARTERLY MANUFACTURING BULLETIN

Understanding the trends and views of manufacturing firms contributes to improved implementation of sector strategies and industrial policy. 

The Quarterly Manufacturing Bulletin is an initiative of the Manufacturing Circle that provides current views of manufacturing firms and an analysis of trends in the South African manufacturing sector. The focus of this development dialogue will be to present the findings of the survey covering the first quarter of 2016 and have a discussion around strategies to support the manufacturing sector in ways that support employment and equitable economic growth.

This edition of the Monitor focuses on the Employment Problem in South Africa