Dark clouds for businesses in South Africa

Manufacturers in South Africa are concerned about the increasing tension between the USA and South Africa despite an overall improvement in sentiment.

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) increased by 4 points to 48.7 in March 2025.

Although the PMI was in contractionary territory for the fifth straight month, this is the highest reading since the 52.6 points seen in October.

Despite a slight recovery in March, a weak January and February mean that the average for 2025Q1 increased to 46.2 points, below 2024Q4’s 49 points.

The business activity index jumped by 7.7 points to 48.3 in March due to improved demand. The new sales orders increased by 10.2 points to 48.7 points in March following a turnaround in export sales.

The index tracking export sales also showed significant gains in the export markets, with sales returning to expansionary territory for the first time in four months.

This comes despite the current global trade disagreements and logistical issues. Respondents’ comments indicated that logistical issues at the ports remain.

Moreover, souring relations with the USA are also bringing uncertainty, even if it is not yet affecting trade in South Africa.

The supplier deliveries index decreased slightly by 0.8 points to 54.1 points, indicating some improvement in delivery times, as the index is reversed.

The slight improvement could also be welcome if driven by better-working supply chains, but could also reflect sustained weaker demand.

The employment index also increased by 3.9 points to 46.1, but remained in contractionary territory over the last year.

The inventories index ticked down to 45.9 in March as manufacturers reduced their stock of finished goods and raw materials, which was due slowing activity.

The purchasing price index decreased by 5.9 points to 64.5 in March. Compared to other emerging market economies, the rand exchange rate has been relatively stronger against the US dollar.

The stronger rand has served manufacturers well in terms of imported materials and fuel prices. This means that cost pressures are easing following two months of cost increases.

However, the index tracking expected business conditions in six months dropped further by 2.5 points to 58 in March. This was below the 60 points for the first time since 57.6 points in May 2024.

The Bureau for Economic Research (BER) said that the return of load shedding and the tense SA-US relations are likely weighing on sentiment.