The bell tolls for South Africa’s industrial backbone as yet another factory will be wound down and retired due to a lack of competitiveness and tough operating conditions that are rendering it unviable.
Last week BDLive ran a story about Duracell supplier Delta EMD.
Delta EMD, one of the JSE’s oldest industrial counters, pulled the plug on its electrolytic manganese dioxide (EMD) operations, which supplies the global alkaline battery sector.
Delta EMD said it was also hampered by the increasing cost of doing business, its limited competitive advantages and the need for “substantial” capital expenditure to sustain operations.
The company will now limit production at its Nelspruit operation, and is expected to have one of the two EMD production lines idled by the end of this month.
“The decision to discontinue business was based on long-term trends in the EMD business which are unlikely to reverse,” he said.
The development is set to trigger morbid commentary on South Africa’s continued de-industrialisation, brought on by soaring labour costs and higher energy bills.
Expect more of these kinds of stories as the state’s heavy regulatory hand wreaks havoc in productive industries in South Africa’s manufacturing heartland. This is the hidden story behind the country’s retail and credit-infused veneer of ‘growth’, and it looks as though things are getting worse. Since demand derives from production, if this is indeed a deteriorating trend in productive capacity then real, sustainable demand is in the process of faltering.
South Africa faces a deep, structural economic crisis that the governing authorities seem mostly oblivious to, and Delta EMD is just the latest casualty.
Chris Becker wrote about this in August last year and produced this chart comparing SA’s retail and manufacturing divergence.
(h/t Hilton Tarrant)