How the rise in inflation is impacting South African manufacturers

Producer Price Inflation in South Africa jumped to 14.7 per cent in May, exceeding expectations, according to data from Statistics SA. The Consensus forecast was for prices to rise to 13.9 per cent from 13.1 per cent. To talk about how rising cost pressures in the economy are affecting its business, CNBC Africa is joined by Tatenda Mureza CEO of car group Mureza Auto.

Thu, 30 Jun 2022 13:06:14 GMT

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Rising inflation in South Africa, with producer price inflation reaching 14.7% in May, is significantly impacting businesses across various sectors, including the automotive industry.
Mureza Auto, a leading car manufacturer, is facing challenges due to soaring operational costs, particularly in transportation and fuel. The company is adapting its strategies and focusing on operational efficiency and product diversification to mitigate the effects of inflation.
The CEO of Mureza Auto, Tatenda Mureza, highlighted the importance of reevaluating growth plans and prioritizing essential manufacturing processes amidst the turbulent economic conditions. Despite the challenges, the company remains optimistic and is actively working towards sustainable growth and innovation.

South Africa is facing a challenging time as producer price inflation has surged to 14.7% in May, surpassing expectations. The impact of this rise in inflation is being felt across various sectors, including the automotive industry. Tatenda Mureza, the CEO of Mureza Auto, recently discussed how the increasing cost pressures in the economy are affecting his business. In the interview with CNBC Africa, Mureza highlighted the significant challenges that businesses, especially small and medium enterprises, are currently facing. He emphasized that the rising costs, particularly in transportation and fuel, have had a severe impact on production and operations. Many suppliers have had to shut down due to the inability to afford the escalating electricity costs, further exacerbating the situation. Mureza pointed out that the hike in fuel prices, with petrol up by 30.4% and diesel by 54%, has made it extremely challenging for businesses to sustain their operations. The inflationary pressures have also affected car part prices, with an increase of 12%, adding to the financial strain on manufacturers. Despite these challenges, Mureza Auto remains resilient and is adapting its business strategies to navigate through these turbulent times. The company, which operates in multiple countries, including South Africa and the Middle East, is focusing on operational efficiency and product diversification to mitigate the impact of inflation. Mureza mentioned that in stable regions like the Middle East, the company is able to anticipate and plan for production disruptions caused by inflation. However, in South Africa, the situation is more dire, prompting the company to reevaluate growth plans and prioritize the manufacturing of essential vehicle components. The CEO acknowledged that the current economic climate has forced Mureza Auto to make tough decisions and adjust its short-term goals. As the business landscape continues to evolve, Mureza Auto is actively establishing a distribution network and enhancing its training programs to ensure sustainability and growth. Despite the uncertainties and challenges posed by inflation and rising operational costs, Mureza remains optimistic about the future and is committed to weathering the storm while maintaining a focus on innovation and adaptability.