Despite narrowly avoiding being labelled with the dreaded ‘r’ word by achieving GDP growth of 0,6% in the second quarter of this year, South Africa’s economy still faces bleak prospects for the foreseeable future. This applies in particular to a manufacturing sector that has yet to tally up the cost of Numsa’s recent prolonged strike action.
According to figures from manufacturing sector advocacy group Manufacturing Circle, the sector not only shrank by 0,3% in the second quarter, but shed 59 000 jobs in the same period.
Speaking to a highly respected veteran of the electronics manufacturing industry (under condition of anonymity), it is clear that the ramifications of Numsa’s strike for this industry segment extend far beyond the immediate financial cost of the downtime suffered.
For those companies with clienteles concentrated in the mining and military areas, which have themselves been put under pressure by striking platinum and metal workers, orders have been put on hold and pushed out, sometimes indefinitely.
The fact that all electronic assemblies have to go into some form of enclosure, and metal and even plastic enclosure manufacturers have been under pressure, has added an extra burden. At its worst, this source said they even had component distributors unable to provide quotes due to the strike.
They went on to explain that these issues make manufacturers more conservative and reluctant to invest in growth, since the perception is that the more a company relies on its workforce, the more vulnerable it is. “Every factory in the world manages its budgets and expectations on full capacity over the year,” they said. “In an industry that works on such thin margins, an idle factory for a month can be fatal.”
Ramping up production after a strike action can be relatively painless, provided the requisite materials and labour are at hand. Otherwise it can be a frustrating process, and manufacturing overheads remain the same if a plant is busy or not; if workers return and spend a week waiting for materials to arrive, they still need to get paid for not working.
Furthermore, as companies try to keep stock levels at a minimum, most manufacturers work on a just-in-time principle, so while suppliers are going through the process of ramping up, the rest of the supply chain is kept waiting.
Hopefully conditions will remain stable long enough for the ever resilient electronics manufacturing industry to recover its equilibrium.
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