The wave of unprotected mining strikes, which finally appear to be ending, were likely to remain a drag on South Africa’s already embattled manufacturing sector for at least the coming quarter and possibly beyond, the Manufacturing Circle warned on Thursday.

In releasing its third-quarter bulletin, the organisation – which has grown to represent 73 large, medium and small enterprises across the manufacturing spectrum, from metal fabricators and electrical equipment firms, to clothing, pharmaceuticals and food producers – indicated that business conditions were already fragile, owing to weak domestic and export markets.

However, the recent strikes in the mining and transport sectors had not only negatively affected immediate prospects, but were likely to weigh on future prospects for a sector that contributes about 15% of South Africa’s gross domestic product and employs around 1.7-million people.

Manufacturing output in September fell by a seasonally adjusted 2.3% month-on-month and 1.1% year-on-year – below expectations of a 0.5% rise for the month and material retreat from the yearly increase of 2.8% recorded in August.

For the third quarter as a whole, manufacturing production rose at a seasonally adjusted annualised rate of 1.1%, but the forward-looking Kagiso Purchasing Managers Index dropped to 46.2 points in October, remaining below the key 50 level, separating likely manufacturing expansion from probable contraction.

Not all Manufacturing Circle members were directly exposed to the mining industry, but many South African manufacturers remained strongly aligned to the fortunes of the country’s resources sector.

A pull back in mining production directly affected those industrial enterprises that supply inputs to the mines, while any deferment or abandonment of capital investment plans affected those companies that supplied capital equipment.

Month-on-month mining output contracted 8% during September and fell 8.3% when compared with the same month last year.

However, wildcat strike activity continued at some operations into October and November, prompting Finance Minister Pravin Gordhan to warn in early November that export revenues could be R12.5-billion lower in 2012 as a direct result of industrial-relations tensions.

Gordhan said export losses would exceed direct losses as mining had strong linkages to other sectors of the economy, such as fabricated metal products, machinery and equipment, rubber and basic iron and steel.

By early November, the direct production losses in gold and platinum amounted to R10.1-billion, while coal production losses were calculated to be R180-million.

Pan-African Research and Investment Services economist Dr Iraj Abedian, who prepares the quarterly bulletin’s on behalf of the Manufacturing Circle, said the current warning that certain mining investments could be cut or deferred “did not augur well for manufacturing”.

“There is a very strong linkage between manufacturing and mining,” Abedian stressed, adding that the lag between a decline in mining output and a fall in manufacturing activity could span some months.

Orders associated with mining investments often flowed only six to nine months after a project’s announcement and “when they decide to contract, the impact works its way back in the form of a negative domino effect”.

“The outlook for manufacturing activity in South Africa remains lackluster,” Manufacturing Circle chairperson Stewart Jennings warned, noting that an increasing number of respondents to its survey had described the business-confidence outlook to be “fragile or weak”. In fact, 45 of the 73 respondents were in that category, with 23 describing the outlook at “stable”.

Most respondents were “downbeat” about the domestic and global demand outlook. But some highlighted that strong growth in the rest of sub-Saharan Africa was providing opportunities, particularly in the mining and infrastructure milieus.