Factories cut jobs

Tamlyn Stewart

Tamlyn Stewart

Workers in the manufacturing sector should start proving they are indispensable to their employer.

The Bureau for Economic Research (BER) manufacturing confidence index sank to a nine-year low in the third quarter of this year, and manufacturers have already started retrenching staff.

Confidence fell because local demand for goods fell as consumer spending slowed.

Most manufacturers reported a decline of around 30percent in local sales and order volumes, which caused production to fall.

"Although manufacturers expected these sales and order volumes to decline, the extent of the decline was unexpected," said BER economist Christelle Grobler.

Lower production translates into higher costs per unit produced, and manufacturers under pressure are retrenching workers to cut back on costs. "Retrenchments continued in the third quarter," said Grobler. "And manufacturers expect to continue retrenching workers in the fourth quarter. It is the only way most of them can stay afloat given the decline in order volumes - when production goes down costs go up," she said.

The index showed that export performance improved during July, August and September, and manufacturers expected to increase export volumes in a year's time. However, Grobler said she thought manufacturers might be "over-estimating that opportunity".

Nedbank economist Nicky Weimar agreed: "For manufacturers, locally consumer demand has slowed, and globally the world economy looks exceedingly shaky at the moment. So on the export side it is not looking positive. They have to cut costs and ultimately it comes down to labour."