the increasing levels of imported inputs. The value of intermediate
input imports into the M&E cluster increased continuously from
2009 to 2014, receded thereafter, but have continued trending
at higher levels. High import penetration is counter-productive to
industrialisation norms, also impacting negatively on the number of
employment in the sub-component, including the broader industrial
production. De-industrialisation has also contributed negatively
towards production in the broader manufacturing sector, given that
the sector’s role as the foremost contributor to real gross domestic
product (GDP) has diminished consistently from the 1990s to date,
with the sector ceding that role to the financial services sector.
On a positive note, though, there was an up-tick in production in
the M&E cluster in 2017 after four hard years of negative growth,
business confidence is rebounding and export competitiveness has
gained impetus characterised by structural shift in trade into Africa,
which is now the prime export destination, as opposed to Europe.
The world trade index also continues to perform well, although the
spanner in the works is the recent move by the United States (US)
to aggressively pursue protectionism, under the guise of defending
national security as premised under sections 301 and 232 action
plans. However, there is a collaborative global initiative in place
aimed at finding a sound solution to the quandary. This is important
given the potential for retaliation from other countries and the dire
second-round effects, including the possibility of a synchronised
global upswing being impacted negatively. Accordingly, the support
from the South African Government for the M&E cluster in general
and the steel industry in particular is laudable, especially given the
strategic nature of the steel industry.
Q
Denwa Engineering
: What is the outlook for the economy and what
impact will it have on the M&E sector?
A
: The domestic outlook is positive as the economy is expected
to continue improving in the short to medium term. This will
boost the supply-side dynamics, reduce the output gap and, hopefully,
translate into better GDP per capita and lower poverty levels. The
prognostics for gross fixed capital formation, automotive sector,
construction and agricultural production are all positive. This is good
for the M&E cluster, which will benefit from the improved production,
given that these sectors have enhanced levels of interdependency
with the cluster.
Q
: What are the suggested solutions for the
challenges facing the M&E sector?
A
: Companies must contribute towards improving conditions
that are conducive for boosting domestic demand by going back
to the basics, getting it right and also havin