Metal and steel industry faces tough times
Namibia’s metal and engineering equipment supply sector is currently faced with a challenge of meeting output requirements as the industry lacks regulatory support, and is constantly competing with the excess pour in of steel products from other countries.
Namibia’s overall spending on its top steel importing markets grew to N$9.5 billion compared to N$4.5 billion recorded last year, mainly driven by the increase in the demand for steel and iron articles.
This comes at a time that the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) revealed that the metals and engineering sector, which made up about 23% of the South African overall manufacturing output, was weakening. SEIFSA said after a slight improvement in resource utilisation in the first quarter, the sector contracted by nearly 0.8% in the second quarter, with capacity utilisation of 77% against the full capacity benchmark of 85%.
Namibia is not sparred the hard-times that befell the metal and steel industry in neighbouring South Africa.
“The metal and engineering industry in Namibia has been under pressure for the last couple of years due to low commodity prices in oil, gold, copper and uranium, contributing to low spending,” Dirk Van Niekerk Managing Director of Kraatz Engineering, a metal manufacturing subsidiary company of Ohlthaver and List told The Villager.
South Africa, being one of Namibia’s biggest metal import markets for Namibia, is faced with tough times in production as exports of metals products were soft, while mining is stagnant and the demand from the domestic automotive sector remains low. SEIFSA also revealed that capacity utilisation during the first half of 2016 was 1% lower than during the first half of 2015 and had fallen 2.4% over the remaining 12 months.
Namibia imported about 17 000 vehicles in the last financial year to the tune of N$7.2 billion, while in 2014 vehicle imports stood atN$8 billion worth of vehicles. According to statistics availed by Customs 8 701 tractors; 8 702 buses and SUV; 8 703 vehicles with a capacity not exceeding 3 500 GVM (gross vehicle mass) and 8 704 vehicles with a capacity exceeding 3 500 GVM, including double cabs were imported.
Meanwhile, domestic demand for copper cathodes and copper ores from Peru and ships, vessels, boilers, articles of iron or steel from China has also increased. Namibia recorded an increase in the overall value of imports from India, but this time around fish imports influenced the growth in imports from other countries. The strongest drop was mainly observed from Germany (35.8%), the Bahamas (30.6%) and Democratic Republic of Congo (DRC) (22.6%).
According to Van Niekerk, Kraatz Engineering previously exported minerals to Angola, however at a slower pace.
“Demand (for steel and engineering) is flat or in decline. This is also in line with the South African industry because we lack capacity, infrastructure and regulatory support. A lot of steel manufacturing still happens outside Namibia that gets imported into Namibia,” Van Niekerk said.
The ongoing lower assurance and production levels could lead to possible job losses in the manufacturing sector as Namibia’s manufacturing industry, which is prioritised by both Government and private sector, has failed to come up with a stimulus for growth.
Additionally, the small growth in the manufacturing sector has been blamed for slow economic growth and poor employment creation. In addition, the sector recorded a decrease of about 14% in 2015, compared to the 18% recorded in the preceding year. However, the manufacturing sector that recorded strong growths of 9.5% and 4.8% in the first quarter of 2016 as compared to 1.9% in the same period last year.
According to statistics availed by the Namibian Statistics Agency (NSA), the increase in the real value added for non-basic metal during the first quarter of 2016 was 61.9% while the manufacturing of fabricated metal products stood at 21.6%.