At a time when output needs to improve in order to spur economic recovery. One key concern would be how cost variables could push output in the opposite-direction. Industry has experienced companies that need to deliver services of standard but working below their usual capacity. Staff decreases, working from home, shortages etc. Companies are in a conundrum. Where they have to think about what it actually means to survive and stay in business. The micro eco systems are the first to experience the effects, by the time it hits mainstream, small businesses especially would have scrapped the bottom.
“The manufacturing sector and M&E sub-sector, in particular, are sensitive to cost increases. The 15.6% rise in electricity tariffs as well as increases in transport costs will only serve to deepen the decline in activity in the industry as companies, unable to absorb these costs, could close shop,” said SEIFSA Chief Economist Chifipa Mhango. (c. https://www.seifsa.co.za/article/declining-trend-in-manufacturing-sector-production-worrying-says-seifsa/ )

If price forecasts for steel in 2021 are any indication, we may be facing another eventful year for construction and manufacturing small businesses. While the future is uncertain, an increase of steel prices throughout the beginning of 2021 makes supply tighter while demand tries to recover from pandemic levels.

The economic slowdown from the pandemic paused projects, production, and steel consumption alike. As a result, many producers cut world steel supply to reflect these conditions. In turn forcing local business – especially small to medium enterprises to be on course to increase their prices.

There are several factors that affect bottom line, including equipment costs, insurance fees, payroll expenses, taxes, and other underlying matters. However, steel prices could be one of the most important factors. Rising steel prices, like other rising metal prices, increase the upfront costs you will have to put up in order to complete a project. Higher steel prices can also make it more difficult and more expensive to bid and secure projects.

South African steel production – Upstream and downstream industries need to work together to overcome the challenges of imports and tariffs in the steel industry in general.

With the private sector invested heavily in the steel-intensive non-residential construction sector – having reports of shortages of steel reinforcing bars – The real value of non-residential buildings completed have largely increased in completions in the retail, office and commerce space, while business hub areas like Sandton currently have large construction sites, with several large buildings nearing completion. The bottom of the barrel will definetly be scrapped, and that’s usually where subcontractors reside.

Most of the challenges are also faced by many other companies in South Africa. These include currency fluctuations, shortage of skills and development required for/in industry, low tariff protection measures, substitute product/materials such as aluminium and PVC, supply, exporting into Africa and the relative distance between local and international markets. Can your company/business afford to hit a reset button?

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Boitumelo Lesenya

Intervent Universal

+2710 593 0544

info@intervent.co.za