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Volume 3, number 1

2014

DIRECTORATE: AGRO-PROCESSING SUPPORT

Quarterly Economic Review Quarterly Economic Review

of the Agro-processing industry of the Agro-processing industry

in South Africa in South Africa

January to March 2014

agriculture,forestry & fisheriesDepartment:Agriculture, Forestry and FisheriesREPUBLIC OF SOUTH AFRICA

Quarterly Economic Review of the Agro-Quarterly Economic Review of the Agro-

processing industry in processing industry in

South AfricaSouth Africa

Volume 3, number 1

2014

Directorate: Agro-processing Support

January to March 2014

DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES

2015

Published by Department of Agriculture, Forestry and Fisheries

Design and layout by Directorate: Communication Services

Obtainable from the Department of Agriculture, Forestry and Fisheries Directorate: Agro-processing Support Private Bag X416 Pretoria 0001

iii

Preface

The agro-processing industry is among the sectors identified by the Industrial Policy Action Plan (IPAP), the New Growth Path and the National Development Plan for its potential to spur growth and create employment because of its strong backward linkage with the primary agricultural sector. DAFF established a Directorate: Agro-processing Support in 2011 to complement the interventions undertaken by several governmental departments, notably, the Department of Trade and Industry. One of the main purposes of the directorate is to provide timely and updated economic information regarding agro-processing, in order to monitor the performance of the sector and provide an insight into the effects of economic policies and exogenous factors. To achieve this purpose, the directorate has started to publish a regular quar-terly review of the agro-processing industry.

This publication Quarterly Economic Review of the Agro-processing Industry in South Africa: January to March 2014 evalu-ates the performance of the nine divisions within agro-processing during the first quarter of 2014. These divisions, which are in line with the Standard Industrial Classification, are tobacco, textiles, wearing apparel, leather and leather products, footwear, wood and wood products, paper and paper products, rubber products and furniture. The main economic in-dicators reviewed are the changes in producer price, production volume, capacity utilisation by large enterprises, value of sales, formal employment and trade balance. A sector specific outlook is also presented for selected divisions.

Victor Mahlogedi Thindisa

Director: Agro-processing Support

Pretoria

Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the accuracy of the information reported in this

publication. The department will, however, not be liable for the results of action based on this publication.

v

Contents

Executive summary .................................................................................................................................................. vii

1. Introduction .................................................................................................................................................... 1

2. Overview of global economy ......................................................................................................................... 1

3. State of the domestic economy .................................................................................................................... 3

4. The agro-processing industry .......................................................................................................................... 4

4.1 Tobacco ......................................................................................................................................................... 5

4.2 Textiles ............................................................................................................................................................. 5

4.3 Wearing apparel ............................................................................................................................................. 7

4.4 Leather and leather products ......................................................................................................................... 9

4.5 Footwear ........................................................................................................................................................ 10

4.6 Wood and wood products ............................................................................................................................. 12

4.7 Paper and paper products ............................................................................................................................. 14

4.8 Rubber products ............................................................................................................................................. 15

4.9 Furniture .......................................................................................................................................................... 17

5. Conclusion ..................................................................................................................................................... 19

References ............................................................................................................................................................... 19

Compiled by Dr Yemane Gebrehiwet with inputs from:

Deborah Makola

Sefala Building Office 233

503 Belvedere Street, Arcadia, South Africa

All correspondence can be addressed to:

The Director: Agro-processing Support

Private bag X416, Pretoria 0001, South Africa

Tel. +27 (12) 319 8457

Fax +27 (12) 319 8093

E-mail [email protected]

This publication is also available on the internet at: http://www.daff.gov.za

vii

Executive summary

The global economy moderated from 3,4% in the previous quarter to 2,1% during the first quarter of 2014 mainly be-cause of a contraction in the US economy and marginal growth of the euro area. The South African economy, however, contracted by 0,6% owing to a negative growth rate of primary and secondary sector. During the first quarter of 2014, most of the divisions in the agro-processing industry increased production during the first quarter of 2014 compared to the previous quarter. Among the divisions with an increased volume of production are wood and wood products (6,6%), paper and paper products (5,8%), ‘other food products’ (4,2%), rubber products (3,0%), dairy products (2,6%), meat and meat products (0,9%), sawmilling and planing of wood (0,6%), textiles (1,2%) and footwear (1,1%). Conversely, a quarter-to-quarter production decline was recorded in the knitted and crocheted articles (8,3%), furniture (5,9%), leather and leather products (3,3%), beverages (2,7%), grain-mill and bakery products (1,7%) and other textiles (1,7%).

Mainly because of the increase in production volume of the agro-processing products, the nominal value of sales of agro-processing increased by 2,6% as compared with the previous quarter. Therefore, the total value of sales increased from R129 951,8 million in the preceding quarter to R133 311,3 million during the first quarter of 2014. The divisions that showed growth of sales are the following: rubber products (6,9%), wearing apparel (6,9%), textiles (6,7%), paper and paper products (5,0%), wood and wood products (3,5%), food products (3,2%), other textiles (1,4%) and footwear (0,9%). However, value of sales decreased for knitted and crocheted articles (5,7%), leather and leather products (4,3%), furni-ture (2,1%), sawmilling and planing of wood (0,8%) and beverages (0,5%) divisions.

Because of a relatively greater contraction of agro-processing import compared to export, the trade deficit of agro-processing products decreased from R12 945,1 million in the previous quarter to R 12 482,6 million during the first quarter of 2014. Among agro-processing products divisions, the following showed a quarter-to-quarter export decline: wearing apparel (24,2%), beverages (21,6%), footwear (17,7%), rubber (13,0%), tobacco (9,4%), food (6,7%) and textiles (5,6%). Imports of the following agro-processing products increased compared to the previous quarter: tobacco (23,4%), foot-wear (13,3%), wearing apparel (10,9%) rubber (0,8%), and textiles (2,3%) divisions. However, import decreased in food (10,5%), beverages (40,8%), leather and leather products (14,5%),and furniture (20,8%).

Following the contraction of exports, the agro-processing industry shed 3 725 formal jobs in the first quarter of 2014 com-pared to the preceding quarter. Hence, formal employment in the agro-processing industry decreased from 421 128 in the previous quarter to 417 403 in the first quarter of 2014. Formal jobs were shed in furniture (8,8%: 3 431), other textiles (3,0%: 709), footwear (6,4%:702), paper and paper products (2,1%: 654), leather and leather products (3,2%: 136), rub-ber (0,6%: 68) wood and wood products (0,2%:37) and knitted and crochet articles (0,7%:34) divisions. However, the following divisions created jobs: food (0,5%: 935), beverages and tobacco (1,6%: 608), wearing apparel (0,6%: 238), sawmilling and planing of wood (1,6%: 226) and preparation and spinning of textiles (0,6%: 39)

1

1 Introduction

Global economic growth moderated during the first quarter of 2014 prompted by the decline of both advanced and emerging economies. The South African economy contracted compared with the previous quarter as a result of the contraction in the primary and secondary sectors. The tertiary sector, however, accelerated compared with the preced-ing quarter. The manufacturing sector also contracted during the first quarter of 2014. This quarterly review assesses the economic performance of the agro-processing industry, given a moderated global economic growth and a contracted domestic economy in the first quarter of 2014.

The quarterly review is organised as follows: section two and three summarise the global economy and the state of the domestic economy, respectively, during the first quarter of 2014. Section four provides the impact of the global and do-mestic economy on the 9 divisions of the agro-processing industry in brief. The review presented in this section assesses how the performance of the global and domestic economy during the quarter affected the producer price, production volume, capacity utilisation, sales, trade and employment of each division. In addition, an outlook for the second quarter of 2014 is presented for selected divisions. The outlook presents the expectation of domestic sales, export, investment and employment, among others, for the next quarter compared to their levels a year ago.

2Overview of global economy

Global economic growth increased by 2,1% in first quarter of 2014 following a 3,4% growth in the previous quarter. The deceleration is mainly the result of the contraction of the United States economy by 1% owing to the adverse weath-er effects that contributed to the declining in net exports, private inventory investment and fixed investment. The euro area economy showed a 0,7% growth in first quarter of 2014, however, the UK economy accelerated by 3,3% during the period following a 2,7% growth it registered in the previous quarter. The output in Italy and the Netherlands showed a contraction while the German economy showed accelerated growth during the first quarter of 2014.

The output of emerging market slowed mainly as a result of the moderated growth of China’s economy that showed a deceleration from 7,6% in the previous quarter to a 5,9% during the first quarter of 2014. The Japanese economy, how-ever, accelerated significantly by 6,7% in the first quarter of 2014 from the marginal 0,3% growth in the previous quarter.

IMF projects that the global economy would increase marginally from 3,6% in 2014 and 3,9% in 2015 (see Table 2.1). The global growth projection is largely the result of the recovery of advanced economies. The economy of emerging and developing countries is expected to increase modestly and the South African economy is expected to grow by 2,3% in 2014 and 2,7% in 2015.

TABLE 2.1: Overview of the world economic outlook projections (percentage change)

Projections

2012 2013 2014 2015

World outputAdvanced economiesUSEuro areaJapanEmerging market and developing economiesChinaIndiaRussiaBrazilSub-Saharan AfricaSouth Africa

3,21,42,8

–0,71,45,07,74,73,41,04,92,5

3,01,31,9

–0,51,54,77,74,41,32,34,91,9

3,62,22,81,21,44,97,55,41,31,85,42,3

3,92,33,01,51,05,37,36,42,32,75,52,7

Source: IMF (2014)

The global oil price is projected to moderate from $104,07 in 2013 to $104,17 in 2014 and then recede to $97,92 in 2015 (IMF, 2014). The world trade volume of goods and services is projected to accelerate from 3,0% in 2013 to 4,3% in 2014 and 5,3% in 2015. The consumer price inflation in emerging market and developing economies is expected to moder-ate from 5,8% in 2013 to 5,5% in 2014 and 5,2% in 2015. For advanced economies, consumer price inflation is ex-pected to increase from 1,4% in 2013 to 1,5% in 2014 and 1,6% in 2015.

2

TABLE 2.2: Seasonally adjusted estimated growth rates of world manufacturing output, 2014: Q1

Share in the world manufacturing value added (2010)

Growth rate compared to the previous quarter

Growth rate compared to the same period of previous year

WorldIndustrialised economiesNorth AmericaEuropeEast AsiaDeveloping and emerging industrial economies(by development group)ChinaEmerging industrial economiesLeast developed countriesOther developing countriesDeveloping and emerging industrial economies (by region)AfricaAsia and PacificLatin AmericaOthers South Africa

100,067,722,424,717,232,3

15,313,8

0,52,7

32,31,5

21,75,83,3

--

4,80,40,60,9

–0,312,9

19,10,9

-2,50,4

12,9–0,415,8

1,10,9

–1,3

5,13,32,53,15,99,4

13,11,4

–3,0–3,29,40,7

10,51,55,71,8

Source: UNIDO (2014) and Quantec (2014)

World manufacturing output growth rate during the first quarter of 2014 is presented in Table 2.2. Compared to the same period of the previous year (year-on-year), world manufacturing output increased by 5,1% supported by a 3,3% and 9,4% growth of manufacturing in the industrialised and developing and emerging industrial economies, respectively. China and Asia and Pacific showed a significant growth of 13,1% and 10,5% year-on-year, respectively during the period under review. However, manufactured output growth in least developing countries was negative. Spurred by the signifi-cant quarter-to-quarter growth of the manufacturing output in the developing and emerging industrial economies, the world manufacturing output showed a 4,8% growth compared to the previous quarter.

TABLE 2.3: Seasonally adjusted estimated growth rates of output by manufacturing sector, 2014: Q1 (in % compared to the same period of the previous year)

Developing and emerging industrial-ised economies

Industrialised econo-mies

South Africa World

Food and beveragesTextilesWearing apparel, furLeather, leather products and footwear

Wood products Paper and paper productsFurniture and other manufacturing

6,15,89,9

10,8

4,413,113,8

0,92,71,2

–1,6

0,7–5,43,0

2,7–1,90,7

20,4 (leather)4,3 (footwear)

–0,18,13,5

3,35,07,46,8

1,90,98,5


Table 2.3 presents seasonally adjusted year-on-year growth rates of selected agro-processing industries in the world for 2014: Q1. During the period, South Africa’s leather products and paper and paper products grew above the world aver-age. Compared to the industrialised economies, South Africa’s agro-processing industry performed well for most indus-tries except textiles, wearing apparel and wood products. However, South Africa’s agro-processing industry growth was lower compared to the developing and emerging industrialised economies.

TABLE 2.4: Seasonally adjusted estimated growth rates of output by manufacturing sector, 2014: Q1 (in % compared to 2013: Q4)

Developing and emerging industrial-ised economies

Industrialised econo-mies

South Africa World

Food and beveragesTextilesWearing apparel, furLeather, leather products and footwear

Wood products Paper and paper productsFurniture and other manufacturing

9,915,420,617,8

14,819,6

7,4

1,12,25,2

-0,2

–1,7–4,04,0

3,11,25,9

–3,3 (leather) 1,1 (footwear)6,65,8

–4,3

5,011,516,111,9

3,23,85,8


3

The quarter-to-quarter seasonally adjusted growth rates of agro-processing industries during the first quarter of 2014 are presented in Table 2.4. The growth of most South Africa’s agro-processing subsectors was lower compared to the world expect for wood, paper and paper product. Compared to the industrialised economies, South Africa did well in most agro-processing subsectors except textiles, furniture, leather and leather products. However, there was a notable under-performance of South Africa’s agro-processing subsector’s growth compared to developing and emerging industrialised economies during the first quarter of 2014.

3 State of the domestic economy

Subsequent to a firm growth of 3,8% in the previous quarter, South Africa’s economic growth contracted by 0,6% prompted by weaker performance of the primary and secondary sectors (see Table 3.1). Excluding the volatile primary sector, however, the economy showed a marginal growth of 0,7% in the first quarter of 2014. The growth of the primary sector decreased substantially by 17,2% following a 12,8% growth in the previous quarter mainly as a result of a 24,7% contraction in the mining sector. Growth in the agricultural sector moderated from 6,4% in the fourth quarter of 2013 to 2,5% in the first quarter of 2014, owing a slowdown in field crop and horticultural production.

Owing to a 4,4% contraction in the manufacturing sector, the secondary sector contracted by 2,7% during the first quar-ter of 2014. Production was lower in the petroleum, chemical, rubber and plastic products, motor vehicles, parts and accessories; basic iron and steel; glass and non-metallic mineral products; and furniture. The real value added by the electricity, gas and water was marginal during the period; however, real output in the construction sector accelerated from 3,1% in the previous quarter to 4,9% in the first quarter of 2014.

TABLE 3.1: South African economic growth rate (percentage change at seasonally adjusted annualised rates)

Sector2012 2013 2014

Q1 Q2 Q3 Q4 year Q1 Q2 Q3 Q4 year Q1

Primary sectorAgricultureMiningSecondary sectorManufacturing Tertiary sectorNon-primary sector

–9,54,8

–15,15,56,43,13,7

20,29,0

25,4–1,2–1,12,11,3

–4,57,1

–9,11,20,92,01,8

–2,69,9

–7,73,84,42,72,9

–2,02,0

–3,61,82,13,22,8

7,5–4,413,4-5,9–7,92,00,0

–4,7–3,0–5,49,6

11,72,24,0

8,93,6

11,4–4,56,61,3

–0,1

12,86,4

15,79,2

12,31,53,3

2,92,33,11,00,82,01,8

–17,22,5

–24,7–2,7–4,41,80,7

Total 2,5 2,6 1,3 2,3 2,5 0,8 3,2 0,7 3,8 1,9 –0,6

Source: Reserve Bank (2014)

The economic growth in the tertiary sector accelerated by 1,8% in the first quarter of 2014, following a 1,5% increase in the fourth quarter of 2013. The increase is mainly owing to an accelerated growth in the real value added by the finance, insurance, real-estate and business services sector (from 1,5% in the previous quarter to 2,0% during the first quarter of 2014) and general government services sectors (from 0,9% in the previous quarter to 1,7% in the first quarter of 2014). However, real output growth in the trade sector slowed to 2,1% from 2,3% in the previous quarter.

The unemployment rate in the South African economy increased from 24,1 % in the fourth quarter of 2013 to 25,2 % in the first quarter of 2014. Hence, the economy shed 122 000 jobs compared with the previous quarter. Among the industries that shed jobs during the period were transport (66 000), commu-nity and social services (42 000), trade (38 000), private households (14 000) and con-struction (5 000). On the other hand, jobs were created in manufacturing (38 000), utili-ties (3 000) and finance and other business services (8 000) industries. Despite the quar-ter-to-quarter contraction in employment, the total employment in the economy in-creased by 496 000 year-on-year during the period under review.

Source: Statistics SA (2014a)

4

The year-on-year producer price inflation for final manufactured goods accelerated to 7,6% in the first quarter of 2014, following a 6,2% inflation in the previous quarter. The increase in the total producer price inflation is mainly the result of the acceleration in the PPI for petrol, metals and machinery. The consumer price inflation also accelerated marginally from 5,4% in 2013:Q4 to 5,9% in 2014:Q1.

The consumer price inflation for processed and unprocessed food products increased by 6,2% and 6,4%, respectively. As a result, food inflation increased by 6,4% following a 4,0% inflation in the previous quarter. Among the food products, meat and bread and

cereals consumer prices showed a 4,6% and 7,3% inflation respectively. Similarly, petrol and electricity consumer prices increased by 12,6% and 7,3%, respectively.

TABLE 3.2: Exchange rates of the rand (percentage change)

Currency

30 Jun. 2012 to 31 Sep. 2012

30 Sep. 2012 to 31 Dec. 2012

31 Dec. 2012 to 31 Mar. 2013

31 Mar. 2013 to 1Jun. 2013

31 Jun. 2013 to 30 Sep. 2013

30 Sep. 2013 to 31 Dec. 2013

31 Dec. 2013 to 31 Mar. 2014

Weighted average 1 –4,8 –2,8 –5,7 6,8 –3,5 –3,8 –1,2

EuroUS dollarChinese yuanBritish poundJapanese yen

–1,9–7,5–6,7–5,3

–10,5

–5,0–3,1–3,9–2,7–1,4

–5,5–8,3–8,5–2,30,3

–8,9–7,2–8,3–7,6–2,5

–4,7–1,3–1,6–6,9–2,4

–5,4–3,5–4,6–5,73,5

–1,1–1,21,4

–1,9–3,2

Source: Reserve Bank (2014)

Table 3.2 shows the exchange rates of the rand since the third quarter of 2012. The nominal effective exchange rate of the rand depreciated by 1,2 % in the first quarter of 2014 following a 3,8 % depreciation in the previous quarter. The do-mestic currency depreciated compared to most currencies except the Chinese yuan during the period under review (Reserve Bank, 2014).

4 The agro-processing industry

The FAO (1997) defines agro-processing as a subset of manufacturing that processes raw materials and interme-diate products derived from the agricultural sector. Therefore, the agro-processing industry basically transforms products originating from agriculture, forestry and fisheries. According to the Standard Industrial Classification, the agro-processing industry comprises the following 11 divisions: food products, beverages, tobacco, textiles, wearing apparel, leather and leather products, footwear, paper and paper products, wood and wood products, rubber and furniture. This section re-views the economic performance of 9 divisions2 during the first quarter of 2014 given the global and domestic eco-nomic situation during the period.

Source: Statistics SA (2014b, 2014c)

1 The Reserve Bank calculates the nominal effective exchange rate of the rand based on trade in and consumption of manufactured goods between South Africa and its most important trading partners. It is calculated against 15 currencies. The weights of the five major currencies are in brackets: Euro (0,34), US dollar (0,14), Chinese yuan (0,12), British pound (0,10), Japanese yen (0,10).

2 The Directorate: Agro-processing Support prepares a separate economic review for the food and beverage industry. However, in this report when the overall agro-processing industry’s sales, export, import and employment are reported it incorporates the eleven divisions, including the food and beverages.

5

4.1 TOBACCO

During 2014: Q1, the year-on-year producer price of tobacco products for domestic output increased by 4,3%. Similarly, the quarter-to-quarter producer price for domestic output and exported tobacco products increased by 1,2% (see Table 4.1).

TABLE 4.1: Producer price index for tobacco products (base 2012 = 100)

Indices % change between

2013: Q1 2013: Q4 2014: Q1 2013: Q1 and 2014: Q1 2013: Q4 and 2014: Q1

102,3 105,4 106,7 4,3 1,2

Source: Statistics SA (2014c)

Figure 4.1 shows the quarterly trade balance for tobacco. The year-on-year imports of tobac co rebounded by 4,1% while export contracted by 26,1%. Similarly the quarter-to-quarter exports contracted by 9,4% while imports rebounded by 23,4%. As a result, the trade balance of beverages decreased from a surplus of R193,3 million in the previous quarter to a surplus of R137,1 million in the first quarter of 2014.

4.2 TEXTILES

During the first quarter of 2014, the producer price for domestic output of textiles increased by 3,8% year-on-year. Similarly, it increased by 1,2% during the first quarter of 2014 compared with the previous quarter (see Table 4.2).

TABLE 4.2: Producer price index for textiles (base 2012 = 100)


2013: Q1 2013: Q4 2014: Q1 2013: Q1 and 2014: Q1

2013: Q4 and 2014: Q1

Textiles 103,4 106,0 107,3 3,8 1,2

Source: Statistics SA (2014d)

The seasonally adjusted physical volume of production for textiles contracted by 1,9% year-on-year, following a contraction of 3,0% in the previous quarter. The physical volume of production for other textiles, however, moderated to 2,0% from a 2,2% growth in the previous quarter (see Figure 3.4).

Source: Quantec Easydata (2014)


6

TABLE 4.3: Utilisation and reasons for underutilisation of production capacity by large enterprises: textiles (percentage)

Period Utilisation

Reasons for underutilisation

Total under-utilisation

Shortage of

Insufficient demand

OtherRaw materials

Labour

Skilled Semi and unskilled

2013: Q12013: Q42014: Q1

71,374,069,1

28,726,030,9

1,61,11,2

0,50,20,6

0,20,00,1

24,821,825,1

1,62,83,9

Source: Statistics SA (2014e)

Table 4.3 depicts that in the textile division utilisation of production capacity by large enterprises decreased both year-on-year as compared to the previous quarter. Insufficient demand was the main reason for the underutilisation of production capacity by large enterprises of textiles, followed by other reasons such as downtime because of maintenance, sea-sonal factors and lower productivity.

The year-on-year value of sales for textiles increased by 12,4% during 2014 : Q1 following a 7,5% growth in the previous quarter. For other textile products, the value of sales moderated to 5,8% year-on-year, following a 7,4% increase in the previous quarter. Compared with the previous quarter, the value of sales of textiles and other textile products increased by 6,7% and 1,4%, respectively (see Figure 4.3).

Having increased by 20,6% year-on-year in the pre-vious quarter, exports of textiles further accelerated to 22,0% during 2014: Q1. The year-on-year growth of import also accelerated to 22,2% from 17% in the previous quarter. Compared with the previous quarter export of textiles contracted by 5,6% and import rebounded by 2,3%, following an 8,4% quarter-to-quarter contraction. Hence, the trade de ficit of textiles increased from R1 899,3 million in the previous quarter to R2 009,2 million during the first quarter of 2014 (see Figure 4.4).

Formal employment in the other textile divisions in-creased by 1% year-on-year, following stagnation in the previous quarter. The formal employment in the preparation and spinning of textile fibres, weaving of textiles, however, contracted by 6,0% (see Figure 4.5). Compared with the previous quarter, employ-ment in other textiles division contracted by 3%, while in the preparation, spinning of textile fibres and weaving of textiles, it increased by 0,5%. There-fore, the total employment in the textiles industry decreased from 31 894 in the previous quarter to 31 224 during the first quarter of 2014.


Source: Quantec EasyData (2014)

Source: Statistics SA (2014f)

7

TABLE 4.4: Net balance of the BER manufacturing survey: textiles

2013: Q3 2013: Q4 2014: Q1 2014: Q2*

Domestic sales volumesExport sales volumesProduction volumesDomestic order volumes receivedExport order volumes receivedGeneral business conditionNumber of factory workersFixed investmentBusiness confidence3

Expected volume of goods imported in 12 months’ timeExpected volume of goods exported in 12 months’ timeExpected real investment in machinery and equipment in 12 months’ timeExpected business condition in 12 months’ time

–40–3

–41–4220

–47–381923

–1236

–10–17

–36–933

18–42–48

–63716

–3329

1

–111211

–1121

–17–25

442

–3450

86

263626

36–1626

-3–10

*ExpectedSource: BER (2014)

Table 4.4 presents the manufacturing survey of the textile division conducted by BER during the first quarter of 2014. The outlook for the second quarter of 2014 shows a year-on-year decline is expected in employment, fixed investment and general business conditions; however, an increase in domestic sales, export and production volumes is projected.

4.3 WEARING APPAREL

Table 4.5 shows the producer price index for domestic and imported wearing apparel increased by to 17,6% and 8,8% year-on-year, respectively. Compared to the previous quarter, the domestic and imported wearing apparel increased by 2,1% and 1,8% respectively.

TABLE 4.5: Producer price index for wearing apparel (base 2012 = 100)

Indices % change

2013: Q1 2013: Q4 2014: Q1 2013: Q4 and 2014: Q1

2013: Q4 and2014: Q1

Wearing apparel

Domestic output (2012=100)

102,0 109,0 111,0 8,8 1,8

Imported commodities

98,1 113,0 115,4 17,6 2,1


The seasonally adjusted physical volume of production for wearing apparel rebounded by 0,7%, following a 3,7% year-on-year contraction in the previous quarter. On the other hand, the volume of production for knit-ted or crocheted fabrics further decelerated by 8,0% year-on-year, following a contraction of 5,4% in the previous quarter.

Compared with the previous quarter, the volume of production for wearing apparel increased by 5,9%, while for knitted and crocheted fabrics it decreased by 8,3% (see Figure 4.6).


8

TABLE 4.6: Utilisation and reasons for underutilisation of production capacity by large enterprises: wearing apparel (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

80,981,780,1

19,118,319,9

1,30,50,4

0,30,80,9

0,80,30,3

13,314,115,4

3,52,63,0


Table 4.6 shows that the utilisation of production capacity by large enterprises in the wearing apparel division decreased slightly both year-on-year and compared with the previous quarter. Insufficient demand followed by other reasons such as lower productivity, seasonal factors and downtime owing to maintenance are the main reasons for underutilisation.

Figure 4.7 shows that year-on-year seasonally ad-justed value of sales accelerated for both wearing apparel and knitted or crocheted fabrics by 9,3% and 5,2% respectively during the first quarter of 2014. While the value of sales for knitted and cro-cheted fabrics contracted by 5,7% the value of sales for wearing apparel increased by 6,9% com-pared to the previous quarter.

Export of wearing apparel contracted by 4,8% year-on-year during 2014: Q1, following the 20,5% growth it showed in the previous quarter. However, imports grew by 17% year-on-year during the period. Com-pared with the previous quarter, export declined considerably by 24,2%, while import in creas ed by 11,0%. As a result of the contraction in export, the trade deficit increased to R4 803,1 million during the first quarter of 2014 from R4 235,4 million in the previ-ous quarter (see Figure 4.8).

Formal employment of the knitted and crocheted fabric articles increased by 2,6% year-on-year, while for wearing apparel, except fur; dressing and dying of fur, it contracted by 5,6%. Compared with the previous quarter, however, the wearing apparel, except fur category showed a marginal 0,6% growth, while for knitted and crocheted fabrics and articles, it declined by 0,7%. Hence, the total em-ployment in the wearing apparel division increased from 45 474 in the previous quarter to 45 678 during the first quarter of 2014 (see Figure 4.9).

Source: Quantec EasyData (2014d)


Source: Quantec EasyData (2014f

9

TABLE 4.7: Net balance of the BER manufacturing survey: clothing

2013: Q3 2013: Q4 2014: Q1 2014: Q2*



5–132418

–13187

1378

–232

–69

566364566218727723557043

–34

3076453478

–57–478548

–408245

–42

–73–53–77–73–53–8171

7


Table 4.7 presents the manufacturing of wearing apparel division by BER during 2014:Q1. The outlook shows that year-on-year contraction is expected for most variables, except employment and fixed investment.

4.4 LEATHER AND LEATHER PRODUCTS

During 2014: Q1, the year-on-year seasonally ad-justed volume of production of leather and leather products increased by 20,4% following a 26,3% growth registered in the previous quarter (see Figure 4.10). Compared with the previous quarter, volume of production of leather and leather prod-ucts contracted by 3,3%.

TABLE 4.8: Utilisation and reasons for underutilisation of production capacity by large enterprises: leather and leather products (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

63,675,570,7

36,424,529,3

4,34,25,3

9,80,20,2

0,60,50,5

26,718,122,1

4,11,51,3


The utilisation of production capacity by large enterprises in the leather and leather products division increased year-on-year but showed a contraction compared with the previous quarter (see Table 4.8). The decline in the quarter-to-quarter utilisation of leather and leather products is reflected by the decline in the physical volume of production during the quarter. Among the reasons for underutilisation, insufficient demand and shortage of raw materials remained the two main reasons.


10

Figure 4.11 shows seasonally adjusted value of sales of leather and leather products. The year-on-year val-ue of sales accelerated by 25,9%, following an in-crease of 23,1% registered in the previous quarter. Compared with the previous quarter the value of sales of leather and leather products contracted by 4,3% following an increase of 10,8% quarter-to-quar-ter registered in the previous quarter.

Figure 4.12 presents the quarterly trade balance of leather and leather products. The export and import of leather increased by 76,6% and 20,2% year-on-year, respectively, during the first quarter of 2014. However, compared with the previous quarter, export increased by 12,4% while import contracted by 14,5%. As a result, the trade deficit declined signifi-cantly from R473,9 million in the previous quarter to R280,4 million during the first quarter of 2014.

The year-on-year formal employment in the leather and leather products industry declined by 3,6%, fol-lowing a contraction of 2,8% in the previous quarter. Having increased by 3,5% quarter-to-quarter during the fourth quarter of 2013, formal employment con-tracted by 3% compared with the previous quarter. Therefore the total employment in the leather and leather products division declined from 4 279 in the previous quarter to 4 143 during the first quarter of 2014 (see Figure 4.13).

4.5 FOOTWEAR

The producer price of footwear for domestic output increased by 0,7% year-on-year during the first quarter of 2014. Compared with the previous quarter, it increased by 1,9% (see Table 4.9).

TABLE 4.9: Producer price index for footwear (base 2012 = 100)


2013: Q1 2013: Q4 2014: Q1 2013: Q1 and 2014: Q1 2013: Q4 and 2014: Q1

104,3 103,0 105,0 0,7 1,9





11

Figure 4.14 shows the seasonally adjusted physi-cal volume of production of the footwear industry. During 2014: Q1 the year-on-year physical vol-ume of production for footwear moderated to 4,3%, following a 10,8% growth in the previous quarter. The quarter-to-quarter volume of produc-tion also increased by 1,1% compared with the previous quarter, following a quarter-to-quarter stagnation in the previous quarter.

TABLE 4.10: Utilisation and reasons for underutilisation of production capacity by large enterprises: footwear (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

87,488,687,0

12,611,413,0

2,11,82,4

1,21,31,9

0,00,00,0

9,38,38,8

0,00,00,0


During the first quarter of 2014, the utilisation of production capacity by large enterprises in the footwear division declined both year-on-year and compared with the previous quarter (see Table 4.10). Insufficient demand remained the main reason behind low capacity utilisation, followed by shortage of raw materials and skilled labour.

Figure 4.15 presents the seasonally adjusted val-ue of sales of the footwear division. During 2014: Q1, the value of sales increased by 2,4% year-on-year. Mainly because of the increase in the vol-ume of production, the value of sales of footwear division increased by 1% compared with the pre-vious quarter.

Figure 4.16 shows that year-on-year export and import of the footwear division increased signifi-cantly by 20,7% and 16,4% respectively during the first quarter of 2014. Compared with the previ-ous quarter, export contracted by 17,7% while import rebounded by 13,3%. Therefore the trade deficit of the division increased by R 2 528,1 mil-lion during the first quarter of 2014 compared to R2 207,7 million in the previous quarter.




12

The year-on-year formal employment increased by 10,8%, following a 24,3% growth in the previous quarter. Compared with the previous quarter, formal employ-ment for the footwear division declined by 6,4%, de-spite an increase in volume of production (see Figure 4.17).

4.6 WOOD AND WOOD PRODUCTS

During the first quarter of 2014, the producer price of wood and wood products for domestic output increased by 4,6% year-on-year and it remained unchanged compared with the previous quarter (see Table 4.11).

TABLE 4.11: Producer price index for wood and wood products (base 2012 = 100)


2013: Q1 2013: Q4 2014: Q1 2013: Q1 and 2014: Q1 2013: Q4 and 2014: Q1

102,4 106,4 106,4 4,6 0,0


The seasonally adjusted physical volume of production for sawmilling and plaining of wood accelerated by 12,4% year-on-year, following a 7,4% growth in the pre-vious quarter. However, the volume of production for products of wood decreased marginally by 0,1% year-on-year. Compared with the previous quarter, the ad-justed physical volume of production sawmilling and planning increased by 0,6% and for products of wood, it increased by 6,6% (see Figure 4.18).

TABLE 4.12: Utilisation and reasons for underutilisation of production capacity by large enterprises: wood and wood products (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

82,984,782,5

17,115,317,5

1,01,21,8

1,81,21,1

0,00,10,0

9,18,1

10,1

5,24,74,6


As shown on Table 4.12, the utilisation of production capacity by large enterprises of wood and wood products declined both year-on-year and compared with the previous quarter. Insufficient demand and other reasons such as downtime because of maintenance, lower productivity and seasonal factors were the main reasons for underutilisation of produc-tion capacity in the division during the first quarter of 2014.



13

The value of sales for sawmilling and planing of wood accelerated by 19,1% year-on-year, following a 12,4% growth in the previous quarter. Similarly, the value of sales for products of wood rebounded by 4,1% year-on-year following a 2,4% contraction in the previous quarter. Compared with previous quarter, the value of sales for sawmilling and planning of wood contracted by 0,8%, while for products of wood it increased by 3,5% (see Figure 4.19).

During 2014: Q1, the value of export increased moder-ately by 73,8% year-on-year and import increased by 15,4% year-on-year. Compared with the previous quar-ter, the value of export and import showed a rebound of 25,8% and 19,8% respectively. Owing to a remark-able growth in export, the trade deficit decreased from R112,5 million in the previous quarter to R92,9 million during the first quarter of 2014.

During the first quarter of 2014, the number of formal jobs in sawmilling and planing of wood division re-bounded by 1,5% year-on-year, following a contrac-tion of 7,3% in the preceding quarter. Similarly, the number of formal jobs in products of wood division ac-celerated by 3,2% year-on-year from a 1,6% growth registered in the previous quarter. Compared with the previous quarter, the number of formal jobs in sawmill-ing and plaining of wood increased by 1,6% and prod-ucts of wood decreased by 0,2%. As a result, the total number of formal jobs in the overall wood division in-creased from 35 539 in the previous quarter to 35 728 in first quarter of 2014 (see Figure 4.21).

TABLE 4.13: Net balance of the BER manufacturing survey: wood and wood products

2013: Q3 2013: Q4 2014: Q1 2014: Q2*



4207170

–69–34

06217517317

–21

34–20

27–2–56

3845

-4983–71

41–264738

–291317

151

–502031–9

–1778

–20–22–10–26

–4–14


Table 4.13 presents the manufacturing survey of the wood and wood products division by BER during 2014: Q1. The year-on-year growth outlook for 2014: Q2 is negative for all variables except for export sales volume.




14

4.7 PAPER AND PAPER PRODUCTS

Table 4.14 shows that the producer price for domestic output of paper and printed products increased 5,6% year-on-year during 2014: Q1. Compared with the previous quarter, the producer price increased by 0,5%.

TABLE 4.14: Producer price index for paper and printed products (base 2012 = 100)


2013: Q1 2013: Q4 2014: Q1 2013: Q1 and 2014: Q1 2013: Q4 and 2014: Q1

104,5 109,9 110,4 5,6 0,5


The seasonally adjusted physical volume of pro-duction of paper and paper products rebound-ed by 8,1%, during 2014: Q 4, following the 1,2% contraction in the previous quarter. similarly, the volume of production rebounded by 5,8% quar-ter-to-quarter, following the 5,9% contraction re-corded in previous quarter (see Figure 4.22).

TABLE 4.15 Utilisation and reasons for underutilisation of production capacity by large enterprises: paper and paper products (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

84,188,785,5

15,911,314,5

0,90,61,1

1,61,31,3

0,10,00,2

7,14,35,9

6,25,16,0


Table 4.15 shows utilisation of production capacity by large enterprises in the paper division increased marginally year-on-year and decreased modestly compared with the previous quarter. The year-on-year increase in the utilisation of production capacity is reflected by the rebound in volume of production. Insufficient demand and other reasons (such as downtime because of maintenance, lower productivity and seasonal factors) remained to be the main reasons for underutilisation of production capacity.

As the result of an increase in the production volume, the value of sales for paper and paper products ac-celerated to 11,1% year-on-year, following a 5,7% growth in the previous quarter. Following a contrac-tion of 2,4% quarter-to-quarter in the fourth quarter of 2013, the volume of production of paper and paper products rebounded by 5,0%, during 2014: Q1 com-pared with the previous quarter (see Figure 4.23).



15

During 2014: Q1, both export and import of paper and paper products increased by 37,8% and 19,0% year-on-year, respectively. Compared with the pre-vious quarter, export of paper and paper products rebounded by 13,2%, on the other hand, import of paper and paper products contracted by 0,7% dur-ing the first quarter of 2014. As a result, the trade surplus increased from R429,7 million in the previous quarter to R885,7 million during the period under re-view (see Figure 4.24).

Following the increase in production and exports in the paper and paper products division, formal em-ployment increased by 2,2% year-on-year during the 2014: Q1. However, it contracted by 2,1%, com-pared with the previous quarter (see Figure 4.25). As a result, formal employment in the paper and paper products division declined from 31 261 in the previ-ous quarter to 30 607 during the first quarter of 2014.

TABLE 4.16: Net balance of the BER manufacturing survey: paper and paper products

2013: Q3 2013: Q4 2014: Q1 2014: Q2*



51

–245

–1–61444065

71

3654

26234636

–326

–354

811929

–34–10

–82–63–59–83–63–62–431237

–3224-8

–47

–54–9

–17–53–56–23–11

–1


Table 4.16 shows the manufacturing survey of the paper and paper products division by BER during 2014: Q1. The year-on-year growth outlook for the second quarter of 2014 is negative for all variables.

4.8 RUBBER PRODUCTS

The utilisation of production capacity by large enterprise of rubber products in the first quarter of 2014 decreased mod-erately year-on-year and marginally compared with the previous quarter (see Table 4.17). Insufficient demand remained the key reason behind low capacity utilisation followed by other reasons such as downtime because of maintenance, lower productivity and seasonal factors.



16

TABLE 4.17: Utilisation and reasons for underutilisation of production capacity by large enterprises: rubber products (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

87,385,385,0

12,714,715,0

0,70,60,9

0,50,11,7

0,00,00,0

11,413,112,2

0,10,00,2


The seasonally adjusted physical volume of pro-duction of rubber products during 2014: Q1 re-bounded by 3,1% year-on-year, following a contraction of 0,8% in the previous quarter. Similarly, the quarter-to-quarter volume of pro-duction of rubber products increased by 2,9% during the first quarter of 2014, (Figure 4.26).

Owing to an increase in the volume of produc-tion, the value of sales of rubber increased by 11,5% year-on-year (see Figure 4.27). Compared with the previous quarter, the value of sales of rubber products also increased to 6,9% mainly as a result of an increase in production volume.

During 2014: Q1, the year-on-year growth of ex-port and import of rubber products moderated to 3,2% and 1,7% from 8,3% and 10,9%, respec-tively. Compared with the previous quarter, export of rubber products increased by 13,0% while the import of rubber products contracted by 0,8%. As a result, the trade deficit increased from R1 999,5 million in the previous quarter to R2 129,1 million in the first quarter of 2014.



Source: Statistics SA (2014)

17

Despite the increase in the volume of production and export of rubber products, the formal employment in the rubber products division contracted by 3,3% year-on-year and by 0,6% compared with the previous quarter (see Figure 4.29). Therefore, the total formal employment in the division decreased from 12 039 in the previous quarter to 11 971 during the first quarter of 2014.

4.9 FURNITURE

The producer price of furniture for domestic output increased by 3,6% year-on-year. Compared with the previous quarter, the producer price increased by 1,0% (see Table 4.18).

TABLE 4.18: Producer price index for furniture and other manufacturing (base 2012 = 100)


2013: Q1 2013: Q4 2014: Q1 2013: Q1 and 2014: Q1 2013: Q4 and 2014: Q1

101,9 104,5 105,6 3,6 1,0


The seasonally adjusted physical volume of produc-tion for furniture accelerated marginally from 3,1% year-on-year in the preceding quarter to 3,5% during the first quarter of 2014. On the other hand, the quar-ter-to-quarter volume of production of furniture con-tracted by 4,3% during the period (see Figure 4.30).

TABLE 4.19: Utilisation and reasons for underutilisation of production capacity by large enterprises: furniture (percentage)

Period Utilisation



Shortage of

Insufficient demand

OtherRaw materials

Labour


2013: Q12013: Q42014: Q1

78,691,979,7

21,48,1

20,3

2,30,71,2

1,51,11,5

0,00,00,0

16,86,2

17,3

0,80,10,3


As shown in Table 4.19, there was a marginal year-on-year increase in the utilisation of production capacity by large en-terprises of furniture. Compared with previous quarter, the utilisation of production capacity declined sharply, which is re-flected by the contraction of production volume in the division. Insufficient demand remained the main reason for underutilisation of production capacity.



18

The value of sales for furniture accelerated by 7,7% year-on-year after showing a 3,7% growth in the pre-vious quarter (see Figure 4.31). Compared with the previous quarter, the value of sales in the furniture divi-sion contracted by 2,1% mainly as the result of a contraction in production volume.

Export of furniture accelerated remarkably by 22,7% year-on-year after showing a 10,0% growth in the pre-ceding quarter. Import of furniture showed a modest increase of 3,0% year-on-year, following a 3,2% growth in the previous quarter. Compared to the pre-vious quarter, export increased by 0,9%, while import contracted by 20,9%. Owing to a significant contrac-tion of the export, the trade deficit decreased from R675,2 million in the previous quarter to R371,1 million in the period under review.

The formal employment contracted by 1,3% year-on-year and by 8,8% compared with the previous quar-ter (see Figure 4.33). As a result, the total number of formal jobs in the division decreased from 38 789 in the previous quarter to 35 358 during the first quarter of 2014.

TABLE 4.20: Net balance of BER manufacturing survey: furniture

2013: Q3 2013: Q4 2014: Q1 2014: Q2*



25–11425

–13-57–61

91

–185

58–18

45–343846

-61–23–26

–93866–6

–14–11

30–284526

–33–57–18–1816

–235

39–30

–20

4053

0–15–21–15





19

Table 4.20 shows the manufacturing survey of furniture division by BER during 2014: Q1. The year-on-year growth outlook for the second quarter of 2014 is negative or neutral for most variables expect for production volumes and domestic or-der volumes received.

Conclusion

Despite a negative domestic economic growth, volume of production of most of agro-processing industry divi-sions increased during the first quarter of 2014. As a result, the nominal value of sales of the agro-processing industry in-creased from R129 951,8 million in the preceding quarter to R133 311,3 million during the first quarter of 2014. The relatively higher decline of agro-processing import relative to export during the period, however, reduced the trade deficit of the industry from R12 945,1 million in the previous quarter to R12 482,6 million during the first quarter of 2014. Following the contraction of exports, the industry shed 3 725 formal jobs compared to the previous quarter. Hence, the number of formal jobs in the agro-processing industry decreased from 421 128 in the previous quarter to 417 403 in the first quarter of 2014.

References

BER (2014), Manufacturing Survey. Bureau for Economic Research, University of Stellenbosch.

FAO (1997), The State of Food and Agriculture. Rome: Food and Agriculture Organization.

IMF (2014), World Economic Outlook, Update. International Monetary Fund.

Quantec EasyData (2014), RSA International Trade. Accessed in March 2014.

Reserve Bank (2014), Quarterly Bulletin, March 2014. South African Reserve Bank.

Statistics SA (2014a), Quarterly Labour Force Survey, various issues. Statistics South Africa.

Statistics SA (2014b), Consumer Price Index, various issues. Statistics South Africa.

Statistics SA (2014c), Producer Price Index, various issues. Statistics South Africa.

Statistics SA (2014d), Manufacturing: Production and Sales, various issues. Statistics South Africa.

Statistics SA (2014e), Manufacturing: Utilisation of Production Capacity by Large Enterprises. Statistics South Africa.

Statistics SA (2014f), Quarterly Employment Statistics, various issues. Statistics South Africa.

UNIDO (2014), World Manufacturing Production, Statistics for Quarter 1, 2014, Statistics Unit, United Nations Industrial Development Organisation.

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