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South Africa’s mining and manufacturing sectors show slight growth

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Report shows positive growth in the mining and manufacturing industry as both sectors  show slight figures of recovery in third quarter


South Africa’s mining and manufacturing industry shows slight growth in production and sales, but could decline in the near future.

The October 2018, StatsSA report shows both sectors have had figures of recovery from the start of the first quarter.

The mining production overturned a three-month decline with a 0,5% year-on-year growth in the third quarter, with gold being the lowest contributor.

Senior economist, Elize Kruger from NKC African economics, says despite  growth in the mining sector there is nothing to be excited about.

Protest action that started on gold mines in mid-November added to the pressure that the sector has been under over the past months.

A protected wage strike at Sibanye-Stillwater’s gold operations started when The Association of Mineworkers & Construction Union (AMCU) made a demand of  R1,000 annual increases in wages for mine workers.

The National Union of Mineworkers, Solidarity and United Association of SouthAfrica on  the other hand accepted R700 in the first two years and R825 in the third for most of their members.

The Johanessburg based mine urged striking workers to return to work by December 15, 2018. 

“Novemember and December could be impacted by the strike action that we see in the gold mining industry. The fourth quarter data is likely to remain depressed despite the October numbers,” she says.

Gold is the largest negative contributor at -15,1% thus contributing -2,3%percentage points to the overall figures.

Furthermore, increases in electricity prices that will take effect early 2019, will tighten the pressure on the industry adding to headwins faced on a global scale.

“Alluminum sector is impacted by the US import tarrifs increases and the threat of electricity price increases in the order of 15% ,” says Kruger.

The 15% increase is a strategy put in place by the electricity public utility, Eskom, to settle financial constraints.

The request made to the National Energy Regulator of South  Africa will be effective for three years if approved.

The manufacturing industry grew by 3,0% with eight out of 10 sectors showing positive growth rates over the last three months.

According to Kruger, the strong levels of the rand exchange rate put in a helping hand in the manufacturing production and sales sector.

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Economy

Why The High Number Of Employees Quitting Reveals A Strong Job Market

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While recession fears may be looming in the minds of some, new data from the Bureau of Labor Statistics shows that the economy and job market may actually be strengthening.

The quits rate—or the percentage of all employees who quit during a given month—rose to 2.4% in July, according to the BLS’s Jobs Openings and Labor Turnover report, released Tuesday. That translates to 3.6 million people who voluntarily left their jobs in July.

This is the highest the quits rate has been since April 2001, just five months after the Labor Department began tracking it. According to Nick Bunker, an economist at the Indeed Hiring Lab, the quits rate tends to be a reflection of the state of the economy.

READ MORE | 5 Things You Should Do The Night Before A Job Interview

“The level of the quits rate really is a sign of how strong the labor market is,” he says. “If you look at the quits rate over time, it really drops quite a bit when the labor market gets weak. During the recession it was quite low, and now it’s picked up.”

The monthly jobs report, released last week, revealed that the economy gained 130,000 jobs in August, which is 20,000 less than expected, and just a few weeks earlier, the BLS issued a correction stating that it had overestimated by 501,000 how many jobs had been added to the market in 2018 and the first quarter of 2019. Yet despite all that, employees still seem to have confidence in the job market.Today In: Leadership

The quits level, according to the BLS, increased in the private sector by 127,000 for July but was little changed in government. Healthcare and social assistance saw an uptick in departures to the tune of 54,000 workers, while the federal government saw a rise of 3,000.

READ MORE | 5 Questions You Should Never Ask During A Job Interview

The July quits rate in construction was 2.4%, while the number in trade, professional and business services, and leisure and hospitality were 2.6%, 3.1% and 4.8%, respectively. Bunker of Indeed says that the industries that tend to see the highest rate of departuresare those where pay is relatively low, such as leisure and hospitality. An unknown is whether employees are quitting these jobs to go to a new industry or whether they’re leaving for another job in the same industry. Either could be the case, says Bunker.

In a recently published article on the industries seeing the most worker departures, Bunker attributes the uptick to two factors—the strong labor market and faster wage growth in the industries concerned: “A stronger labor market means employers must fill more openings from the ranks of the already employed, who have to quit their jobs, instead of hiring jobless workers. Similarly, faster wage growth in an industry signals workers that opportunities abound and they might get higher pay by taking a new job.”

Even so, recession fears still dominate headlines. According to Bunker, the data shows that when a recession hits, employers pull back on hiring and workers don’t have the opportunity to find new jobs. Thus, workers feel less confident and are less likely to quit.

READ MORE | South Africa’s Informal Sector: Why People Get Stuck In Precarious Jobs

“As the labor market gets stronger, there’s more opportunities for workers who already have jobs. So they quit to go to new jobs or they quit in the hopes of getting new jobs again,” Bunker says. He also notes that recession fears may have little to do with the job market, instead stemming from what is happening in the financial markets, international relations or Washington, D.C.

So what does the BLS report say about the job market? “Taking this report as a whole, it’s indicating that the labor market is still quite strong, but then we lost momentum,” Bunker says. While workers are quitting their jobs, he says that employers are pulling back on the pace at which they’re adding jobs. “While things are quite good right now and workers are taking advantage of that,” he notes, “those opportunities moving forward might be fewer and fewer if the trend keeps up.”

-Samantha Todd; Forbes

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Current Affairs

Roadmap For African Startups

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Francois Bonnici, Head of the Schwab Foundation for Social Entrepreneurship, explains how African impact entrepreneurs will continue to rise.


Does impact investment favor expats over African entrepreneurs? If so, how can it be fixed?

There is a growing recognition all over the world that investment is not a fully objective process, and is biased by the homogeneity of investors, networks and distant locations.

A Village Capital Report cited that 90% of investment in digital financial services and financial inclusion in East Africa in 2015-2016 went to a small group of expatriate-founded businesses, with 80% of disclosed funds emanating from foreign investors.

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In a similar trend recognized in the US over the last decade, reports that only 3% of startup capital went to minority and women entrepreneurs has triggered the rise of new funds focused on gender and minority-lensed investing.

There has been an explosion of African startups all over the continent, and investors are missing out by looking for the same business models that work in Silicon Valley being run by people who can speak and act like them.

In South Africa, empowerment funds and alternative debt fund structures are dedicated to investing in African businesses, but local capital in other African countries may not also be labelled or considered impact investing, but they do still invest in job creation and provision of vital services.

There is still, however, a several billion-dollar financing gap of risk capital in particular, which local capital needs to play a significant part in filling. And of course, African impact entrepreneurs will continue to rise and engage investors convincingly of the growing and unique opportunities on the continent.

READ MORE | The World’s Most Generous Billionaires Outside Of The US

What are the most exciting areas for impact investing and social entrepreneurship today?

After several decades of emergence, the most exciting areas are the explosion of new products, vehicles and structures along with the mainstreaming of impact investment into traditional entities like banks, asset managers and pension funds who are using the impact lens and, more importantly, starting to measure the impact.

At the same time, we’re seeing an emergence of partnership models, policies and an ecosystem of support for the work of social entrepreneurs, who’ve been operating with insufficient capital and blockages in regulation for decades.

Francois Bonnici, Head of the Schwab Foundation for Social Entrepreneurship. Picture: Supplied

The 2019 OECD report on Social Impact Investment  mapped the presence of 590 social impact investment policies in 45 countries over the last decade, but also raises the concern of the risk of ‘impact washing’ without clear definitions, data and impact measurement practices. 

In Africa, we are also seeing National Advisory Boards for Impact Investing emerge in South Africa and social economy policies white papers being developed; all good news for social entrepreneurs.

READ MORE | Naomi Campbell: Africa Is One Of The Leading Continents In The World

What role does technology play in enabling impact investing and social entrepreneurship?

The role of technologies from the mobile phone to cloud services, blockchain, and artificial intelligence is vast in their application to enhancing social impact, improving the efficiency, transparency and trust as we leapfrog old infrastructures and create digital systems that people in underserved communities can now access and control.

From Sproxil (addressing pirated medicines and goods), to Zipline (drones delivering life-saving donor blood to remote areas of Rwanda) to Silulo Ulutho Technologies (digitally empowering women and youth), exciting new ways of addressing inclusion, education and health are possible, and applications are being used in many other areas such as land rights, financial literacy etc.

While we have seen a great mobile penetration, much of Africa still suffers from high data costs, and insufficient investment in education and capacity to lead in areas of the fourth industrial revolution, with the risk that these technologies could negatively impact communities and further drive inequality.

READ MORE | Why Now Is The Time To Invest In African E-commerce

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Economy

Towards One Africa

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In the alphabet soup of regional African trade blocs, will the AfCFTA ease the cost of doing business on the continent?


Ghana has been named the host of the African Continental Free Trade Area (AfCFTA) following four years of talks to form a 55-nation trade bloc. It will be the base for the AfCTA secretariat.

The opportunities for Africa with this new trade bloc are immense. The Economist Intelligence Unit estimates that the AfCFTA will create the world’s largest continental free-trade area, provided all 55 African Union (AU) members join, and has the potential to create an African single market of 1.2 billion consumers whilst eliminating about 90% of tariffs on goods over the next five years.

So far, 44 African countries have signed up for the historic agreement, the world’s largest free trade area since the formation of the World Trade Organization.

READ MORE | Amid Trade Wars, What Africa Must Do

The AfCFTA is expected to boost the economies of African countries through employment creation and the promotion of made-in-Africa goods. But Kayode Akindele, a partner at TIA Capital, a pan-African investment partnership focussed on credit-based investing across sub-Saharan Africa, is not opening up the bubbly just yet.

“We already have ECOWAS [Economic Community of West African States] which doesn’t seem to be working and so why don’t we sort that out first before we enter a continental trade agreement for Africa?”

And he is not alone in his concerns.

“There are other factors we need to also consider. Firstly, with the implementation of the AfCFTA, goods made in other continents could be disguised as made-in-Africa to qualify for duty free treatment. There could also be a reduction in government revenue and also this trade bloc also threatens the profitability and survival of infant industries,” says Vincent Acheampong, an economist based in the United Kingdom.

READ MORE | Ghana Hopes To Benefit From Hosting Africa’s Free Trade Area Secretariat

Of the regional blocs in Africa, including EAC (East African Community) and SADC (Southern African Development Community), the ECOWAS has some way to go in terms of performance, according to Muda Yusuf, the Director General of the Lagos Chamber of Commerce and Industry, in an interview with CNBC Africa. But he believes there is still reason to be optimistic.

“A continental trading bloc is going to build on the success of the regional blocs like ECOWAS and other blocs across Africa. So, this integration is going to build on those blocs. In terms of performance, of course ECOWAS is the least performing because East Africa is doing very well and South Africa is doing far better also. But there is no perfect time for things like this, what is important is for us to get a conviction that economic integration will work for us and also if we can get our institutions to make it work,” says Yusuf.

Amongst the many challenges of the ECOWAS is its failure to implement its vision of a single currency, the ECO, which is part of its plans to make Africa a more integrated continent. That vision has been postponed several times by the 15-member group with the newest target date set for 2020 although most experts believe the date to be unrealistic.

The success of the AfCFTA requires not only a trade policy but also a manufacturing agenda, competition, industrial policies and property rights to work well according to Vera Songwe, the Executive Secretary of the UN Economic Commission for Africa, in a statement at the launch event that took place in Niamey, Niger.

READ MORE | Trade Wars: We’re Next, European Investors Fear

The ninth edition of the flagship Assessing Regional Integration in Africa report (ARIA IX) stipulates that AfCFTA’s success will be due to its ability to actually change lives, reduce poverty and contribute to economic development in Africa.

In support of the new trade bloc, Ghanaian President Nana Akufo-Addo pledged to donate $10 million to the AU to support the operationalization of the secretariat of the AfCFTA.

Although the AfCFTA will be economically transformative for Africa in the long-term, the immediate benefits will be restricted due to the macro-economic uncertainties of regional trade.

“Most African countries are currently not producing the goods and services that their neighbors import, as a result we do not trade a lot with each other. It is easier for an African country to trade with a country in Europe than a country that lies right next to it and these low levels of intra-African trade need to be addressed before we can reap the full benefits of the AfCFTA,” says Acheampong.

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