Uptick in manufacturing positive for packaging industry

A recent announcement by StatsSA indicating an uptick in manufacturing data offers the packaging industry an opportunity to ramp up the move towards digitising their production in preparation for further growth. This is according to Bruce Peters, regional manager in charge of manufacturing at Cisco Southern Africa.

Figures released by StatsSA in October indicate manufacturing production increased by 1.5 per cent in August 2017 compared with August 2016.

Peters believes as the increase was mainly due to higher production in the basic iron and steel, non-ferrous metal products, metal products and machinery division (11.3 per cent and contributing 2.0 percentage points), downstream manufacturers will take up this increased production and provide the packaging industry with slightly increased upstream demand.

‘Meeting this demand will require the packaging industry take advantage of the window to reduce downtime by bringing their internal processes up to speed, and improving the services they offer,’ he says.

In a Cisco survey of more than 600 senior executives in 13 countries—from both industrial machine builders and end-user manufacturers—86 per cent said the transition from product-centric to service-oriented revenue models are a core part of their growth strategies.

Bruce Peters is the regional manager in charge of manufacturing at Cisco Southern Africa
Bruce Peters

StatsSA announced that seasonally adjusted manufacturing production increased by 1.3 per cent in the three months ended August 2017 compared to the previous three months. Six of the ten manufacturing divisions reported positive growth rates over this period.

The following divisions made the largest contributions to the 1.3 per cent increase:

  • basic iron and steel, non-ferrous metal products, metal products and machinery (2.5 per cent and contributing 0.5 of a percentage point)
  • petroleum, chemical products, rubber and plastic products (1.6 per cent and contributing 0.4 of a percentage point)
  • motor vehicles, parts and accessories and other transport equipment (3.9 per cent and contributing 0.3 of a percentage point)
  • furniture and ‘other’ manufacturing (7.1 per cent and contributing 0.2 of a percentage point)

‘It is telling that the two top contributing divisions are strongly related to the packaging industry. Stats SA’s latest figures underscore findings in McKinsey’s research released earlier this month, which point to consumer spending in Africa reaching US$2.1 trillion by 2025 in real 2015 prices. Consumer goods are, by definition, packaged, and I believe that the packaging industry can therefore expect an uptick as well,’ Peters explains.

The McKinsey Global Institute has identified four groups of consumers that will drive much of Africa’s consumption growth between now and 2025. Those earning more than US$50 000 a year in North Africa and South Africa, Nigerian consumers, middle-income consumers in East Africa, and middle-income consumers in Central and West Africa.

These figures come in the wake of recently announced investments in the African packaging market. These include:

  • AB InBev investing in two new packaging lines for returnable glass bottles
  • Mpact announcing a new liquid packaging recycling plant
  • Golden Era partnering with a Nigerian beverage can manufacturer to build a large-scale beverage can plant
  • Nampak’s investments in recent years both locally, in Angola and Nigeria

In 2015, Deloitte predicted the African continent would become ‘a high growth region for the packaging industry.’

According to the company demand would be driven by increased markets for consumer products, burgeoning individual incomes, an expanding population of youthful consumers and growing domestic economies, particularly those in East and West Africa.

Peters warns that the packaging industry will be negatively affected if it doesn’t address digital transformation to reduce downtime.

‘Complexity and a lack of digital capabilities are holding firms back. The top inhibitor to transitioning to a service model is the difficulty of managing a “two-front war”—products and services simultaneously. However, their ability to capture significant value and leapfrog competitors, hinges on accelerating to a service model,’ he says.

To resolve this service dilemma, the services and digital journeys must converge.

‘To unlock the full potential of the service model, while still improving products, industrial machine manufacturers and end-user manufacturers need to digitally transform their businesses,’ he concludes.