Businesses in South Africa took a beating in 2024 – but things are looking up

South African manufacturers suffered a volatile 2024, but many remain optimistic about the future business conditions.

The seasonally adjusted Absa Purchasing Managers’s Index (PMI) declined by 1.9 points to 46.2 points in December 2024, meaning that the index remains in contractionary territory.

This put the average PMI for 2024Q4 at 49 points which was significantly different from 49.8 points for 2024Q3 but above Q1 (47.8) and Q2 (48.1)

The manufacturing sector saw a volatile 2024, with the second straight monthly decline in December reversing the upward momentum seen in September and October.

“The December PMI results underscore the challenges facing South Africa’s manufacturing sector,” said Absa.

The business activity index decreased by 8.7 points to 40.3 in December, with the pullback in production coming on the back of a sharp decline in demand.

The new sales orders index also fell considerably to 37.4 points from 45.9 in November.

Of concern, some respondents said that conditions in December 2024 were far worse than they were in November.

Additionally, export sales fell sharply and dropped back to levels last seen in the first half of 2024.

The supplier deliveries index jumped to 56 points, jumping by 7.7 points and moving above 50 points for the first time in three months.

As production and orders are far weaker, higher demand for supplies is improbable to be the cause of the delays. The index is reversed meaning that it increases when deliveries are slower, as this is normally seen as a positive sign with manufacturers competing for supplies.

Logistical issues remain in both local and global markets, which probably caused the slowdown in delivery times.

The employment index dropped by 0.4 points to 46.5 and remained in contractionary territory for the ninth straight month.

Amidst volatility and a largely depressed activity, the employment index has been well below the neutral 50-point mark for eleven of the twelve months in 2024.

On a positive note, the inverted purchasing price index fell by 1.3 points to 60.4 in December.

Absa and the Bureau for Economic Research (BER) said that development was surprising given that the rand exchange rate was far weaker in December, while fuel and LPGAS prices increased at the beginning of the month.

Absa and the BER noted that the positive outcome of the PMI was that the index measuring expected business conditions in six months increased by 5.2 points to 67.6 in December.

This shows that manufacturers remain optimistic about business conditions in the future.

“The improvement in future expectations suggests manufacturers remain hopeful for a recovery in 2025,” said Absa.

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