The metals and metal products industry, which includes world-class ferroalloy and steel producers, never fully recovered from an unusually sharp downturn in the 2008/9 global financial crisis. In recent years, it has been affected by global overproduction and sliding demand especially from China; an uncompetitive domestic price for iron ore; and increasingly expensive and sometimes unreliable electricity supplies.

In 2015, a surge in (subsidised) Chinese imports added to these factors to push two of the largest companies, Arcelor Mittal and Evraz Highveld, into serious problems, with an attendant downturn in production and employment. The significance of the challenge emerged in the fall in electricity production by 5% from March to September 2015, largely due to downscaling by refineries, which together account for around a fifth of electricity demand.

The rapid depreciation of recent months could provide substantial support for the metals industry. Its main inputs – ores, electricity and labour – should all become more competitive internationally, while imported metal products should see higher rand prices.

The industry contributed 15,4% of total manufacturing production in the third quarter of 2015, down from 15,9% in the third quarter of 2013 and 16,4% in the third quarter of 2010. Within the industry, in 2015 iron and steel accounted for 36%, non-ferrous metals for 28%, structural products for 12% and other fabricated metal products for 23%.

Production fell by 10,5% from third quarter 2013 to the third quarter of 2015, reversing the recovery of 7,4% from the third quarter of 2010 to the third quarter of 2013. The fall was particularly sharp for both steel and non-ferrous metals, with a 15% decline in the volume of production in the past two years. From the second to the third quarter, the industry’s production fell a further 1,1%.

The fall in production was matched by declining employment. Employment in the industry was 272 000 in the third quarter of 2015, down from 301 000 five years earlier and close to 380 000 at its peak in 2008. There was reportedly no change in employment from the second quarter.

Capacity utilisation fell sharply in the past quarter, from 75,5% in the second quarter of 2015 to 71,4% in the third quarter. It had been 76,2% two years earlier, in the third quarter of 2013, with a highpoint of 82,9% in 2008.

Exports of metals and metal products came to 22% of total manufacturing exports in the third quarter of 2015, down from 27% two years earlier, in part due to falling world prices for metals. They accounted for around 44% of total production of metals and metal products in the third quarter of 2015, falling from 46% two years earlier. In dollar terms, exports by the industry came to US$2,5 billion in the third quarter of 2015, declining from US$2,8 billion two years earlier. Compared to the second quarter of 2015, they had dropped from US$2,6 billion. In rand terms, in contrast, they climbed from R28,3 billion in the third quarter of 2013 to R31,3 billion in the second quarter of 2015, then increased further to R32,2 million in the third quarter. That said, the quarterly trade data are not seasonally adjusted, so the changes are not necessarily very meaningful.

Imports of metals and metal products came to 7% of all manufactured imports in the third quarter of 2015, around the same as two years earlier. They equalled about 20% of local production of metals in the third quarter of 2015, down (rather surprisingly) from 22% in the third quarter of 2013. In rand terms, they had risen from R13,2 billion in 2013 to R14,6 billion in the second quarter of 2015, and reached R14,8 billion in the third quarter.

Food and beverages was the largest manufacturing industry and one of the fastest growing over the past five years in terms of both value added and employment. Still, growth slowed to near zero from 2014, and will likely be further affected by the drought and possibly by new arrangements under the US African Growth and Opportunity Act (AGOA) to make it easier for US exporters of agricultural products.

The industry contributed 22,3% of total manufacturing production in the third quarter of 2015, up from 20,6% in the third quarter of 2013. It had climbed steadily from 20,3% in the third quarter of 2010. Meat, dairy, fruit and vegetables contributed around two fifths of total production, beverages over a quarter, and grain milling, under a fifth.

The industry was geared primarily to meeting domestic and regional needs, despite globally important exports of wine. Most other agricultural exports – primarily citrus and other fruits and vegetables – did not involve further manufacturing, although they required sophisticated storage and transport processes.

Production grew fairly steadily at around 2,6% a year from the third quarter of 2010 to the third quarter of 2014, but then slowed to 1,1% in the year to the third quarter of 2015. From the second to the third quarter, production rose by 0,5% in seasonally adjusted terms. Most of the growth from 2010 occurred in meat, dairy, fuirt, vegetables and beverages. In contrast, grain milling and other products expanded only slowly.

Employment was 379 000 in the third quarter of 2015, up from 348 000 five years earlier. Employment in food and beverages reportedly fell from 388 000 in the second quarter of 2015.

Capacity utilisation rose marginally in the past quarter, from 82,7% in the second quarter of 2015 to 83% in the third quarter. It had however been 84,8% two years earlier, in the third quarter of 2013.

Exports of food and beverages came to 8% of total manufacturing exports in the third quarter of 2015, around the same as two years earlier. They accounted for around 11% of total production of food and beverages in the third quarter of 2015, again little changed form 2013.

In dollar terms, exports by the industry came to US$901 million in the third quarter of 2015, from US$879 million two years earlier. Compared to the second quarter of 2015, they had climbed from US$872 million. In rand terms, exports of food and beverages rose from R8,7 billion in the third quarter of 2013 to R10,6 billion in the second quarter of 2015, then increased to R11,7 million in the third quarter. That said, the quarterly trade data are not seasonally adjusted, so the changes are not necessarily very meaningful.

Imports of food and beverages accounted for 4% of all manufactured imports in the third quarter of 2015, virtually unchanged from the third quarter of 2013. They equalled about 8% of local production of food and beverages in the third quarter of 2015, down from 9% in the third quarter of 2013. In rand terms, they climbed from R7,2 billion in 2013 to R8,1 billion in the third quarter of 2015.

The main investment project announced in the third quarter of 2015 was the establishment of a R1 billion beverage tin plant in Johannesburg to serve both South Africa and the region. It will be owned by a joint venture between GZ Industries, West Africa’s largest producer of aluminium beverage cans, and Golden Era Group, South Africa’s largest independent packaging company. It should be able to produce over a billion tins a year, with operations starting in mid-2016.

In addition, in October Unilever opened a new R600-million ice cream plant in Midrand, its first in Africa (out of 40 worldwide). The plant will employ 150 people. It benefited from tax incentives provided by the dti to encourage investment.