Manufacturing & General Industries
Many businesses in the Consumer Business sector face an increasingly depressed environment, with pressure coming from almost no GDP growth, rising unemployment, unpredictable electricity supply and a severely constrained consumer, for many years. The 2020 Covid-19 pandemic has only exacerbated matters and we have seen many clients face unprecedented hurdles as they struggle to stay afloat.
Many of our clients are geared to operating in a low growth economy and we know what it means to focus on efficiencies, cost control, growing profitability and achieving the optimal balance between value and volume. At the same time, companies need to innovate to stay at the forefront of product development to ensure they remain relevant with consumers.
Businesses in South Africa are exposed to cost volatility on many raw material inputs, especially as a result of the fluctuating exchange rates. Currencies also have an impact on product exports. All in all, the operating environment for companies in this sector is not an easy one.
The manufacturing sector remains a significant and important contributor to the country’s Gross Domestic Product. The sector has however underperformed and has been adversely affected by almost no GDP growth, rising unemployment and an unpredictable electricity supply. Add to this an increase in consumer preference for imported goods, largely due to cheap imports, and it’s not surprising the sector is under pressure.
Many factors influence competitiveness in the manufacturing sector: cost and availability of labour and materials; reliability and cost of energy supplies; economic and trade protectionism; financial and tax incentives; physical infrastructure; access to supplier networks; innovation; government investments; and the legal and regulatory environment, to name but a few. There is constant pressure to find innovative ways to tackle each of these drivers so that businesses can thrive.
2020 and the covid-19 pandemic has not been kind to the sector, with production slipping overall compared to 2019. The President’s economic recovery plan aims to stimulate industrial growth, support the local manufacturing industry, and make South African exports much more competitive. The plan envisages goods that are currently imported being manufactured locally through various stimulus measures, and to significantly increase the export of locally manufactured goods to the rest of the African continent.
Furthermore, industry analysts expect the emerging economies to dominate the manufacturing sector in the coming years, due principally to their low cost of labour and stated and intentional policies of emerging market governments to drive the sector. Leading these economies is China, India and Brazil, however South Africa is also poised to benefit from increased and sustainable growth in the sector.
Through our work with clients in these sectors over many years, BDO’s audit, advisory and tax partners understand that you need an adviser who understands the complexities of your business and your operating environment – and what is needed to be successful.
Contact an adviser today