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UPDATE 2-S.African factory output feels impact of strikes
November 8, 2012 / 2:47 PM / in 5 years

UPDATE 2-S.African factory output feels impact of strikes

* Output data worst in 6 months as strikes bite

* Outlook bleak, will weigh on growth

* Interest rates expected to stay on hold (Adds mining data, quotes, background)

By Xola Potelwa

JOHANNESBURG, Nov 8 (Reuters) - South African factory output shrank in September, its worst performance in six months, painting a bleak picture for Africa’s biggest economy after a wave of strikes that began in the mines.

Factory output contracted 1.1 percent year-on-year in September, more than the 0.5 percent reduction analysts had expected. It also compared to a 2.8 percent expansion in August.

“The industrial strikes have begun to take their toll on domestic figures,” said Anisha Arora, emerging markets analyst at 4Cast.

“Strike action rapidly spread from mining to manufacturing and even the services sector well into October, closing plants and operations for weeks and resulting in vast losses of production volumes.”

A wave of wildcat strikes kicked off in the mining sector in early August, and intensified after the Aug. 16 police killing of 34 miners at Lonmin’s Marikana platinum mine, the bloodiest security incident since the end of apartheid in 1994.

At its height, more than 75,000 miners were out on strike, disrupting output in the world’s biggest platinum producer and sparking labour unrest that rippled through the economy, hitting the transport sector and car plants.

Statistics South Africa said mining output fell 8.3 percent in September, its worst performance since April.

Manufacturing contributes about 15 percent of gross domestic product and is a major employer in a country where over 25 percent of the labour force is jobless.

Official statistics last week showed 197,000 people lost jobs in the third quarter. Economists say manufacturing has shed the most jobs since the start of the year due to slackening global demand.

Finance Minister Pravin Gordhan has trimmed growth forecasts to 2.5 percent for this year, saying the strikes probably cost 12.5 billion rand ($1.44 billion) in lost export revenue.

On a month-on-month basis and adjusted for seasonal changes, manufacturing production fell by 2.3 percent, but grew slightly by 0.3 percent in the three months to September compared with the previous quarter.


The Purchasing Managers’ Index, a key leading indicator of manufacturing output, has contracted since September and fell to its lowest level in over a year in October, pointing to a bleak outlook.

Economists expect the central bank to keep interest rates on hold after reducing them pre-emptively in July, even as growth looks likely to disappoint.

“The supply disruptions that occurred in the mining sector are due to factors that central bank policy can do little to counter,” said Nedbank economist Busisiwe Radebe.

Central bank Governor Gill Marcus has cut her growth forecasts and raised concerns about the effects on GDP from the mining strikes coupled with a weak global economy.

Retail sales, due in a week, are one of the few data sets lifting business confidence. Sales growth jumped to 6.4 percent in August and is expected to keep the positive bias through the year.

Consumer spending has historically driven South African growth but a record number of unemployed people may keep a lid on spending this year.

The central bank holds its last monetary policy-setting meeting in two weeks. ($1 = 8.6518 South African rand) (Reporting by Xola Potelwa; Editing by Ed Cropley and Stephen Nisbet)

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