South Africa’s ‘big three’ problem – progress being made

 ·2 Apr 2024

Sentiment within South Africa’s manufacturing sector has taken a step back, but there is a silver lining coming from the logistics sector.

The latest seasonally adjusted Absa Purchasing Managers’ Index (PMI) dropped from 51.7 in February to 49.2 in March – below the neutral level of 50.

“The PMI has been choppy in recent months, but the average for the first quarter of this year is equal to the final quarter of last year,” Absa said.

“In the fourth quarter, the gross value added by the sector managed to eke out a 0.2% quarter-on-quarter expansion, with a more robust annual increase. The PMI generally suggests a similar experience is possible in the first quarter.”

After strong improvements in February, the business activity and new sales orders index dropped in March, with respondents suggesting that demand conditions were sluggish.

In more positive news, the supplier deliveries index dropped significantly, from 62 to 54.1.

“The reason for this being potentially positive news is that it could be one of the first signs that congestion at the local ports is easing somewhat, and deliveries of (imported) supplies are now coming through faster.”

The index is inverted, meaning that faster deliveries result in a decline in the index.

“This is because faster deliveries during times of uncongested and unconstrained supply chains are generally seen as a negative for the sector as it means suppliers are less busy (due to less demand from other clients), and thus, goods are able to get to the respondent faster.”

Although this could have played a role in March, given that demand for manufactured goods dropped, commentary from respondents suggested that better-working supply chains are a key reason for improving delivery times.

This could eventually also lift the inventories for intermediate goods and raw materials, which saw a decline in March.

Logistics, along with electricity, crime, and corruption, is one of the key areas identified by the government and the private sector as needing to be improved to boost the economy.

In another positive development, there was an improvement in sentiment towards business conditions in the future, with the index tracking expected business conditions in six months’ time rising to a solid 62.1 points.

“This is the most upbeat respondents have been about business conditions going forward since the start of 2023.”

Nevertheless, cost pressures continue to climb, with the purchasing price index up for a fourth straight month, driven by the increase in fuel price.

Business activity37.148.644.5
New sales orders37.249.945.5
Supplier deliveries*
Purchasing prices*67.572.274.6

Read: 40 jobs that pay more than the average salary in South Africa

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