South African manufacturing activity remains subdued

The manufacturing sector in South Africa continues to face significant challenges as the seasonally adjusted Absa Purchasing Managers' Index (PMI) dropped another 0.6 points to 44.7 in February, marking its fourth consecutive month in contractionary territory. This sustained contraction indicates the persistent sluggishness in the sector, which has struggled to bounce back from its weak performance at the end of 2024. To delve into the latest PMI data and its implications, CNBC Africa spoke with Andiswa Nondudule, an Economist at ABSA CIB. Nondudule highlighted several key factors driving the continued contraction in the PMI, with a focus on both domestic and global influences. She pointed out that weak demand, both domestically and internationally, has been a significant driver behind the decline in business activity and new sales orders. Global economic growth concerns and local economic challenges have contributed to this subdued demand, impacting manufacturing activity in the country. Moreover, the employment index in the manufacturing sector has been continuously declining, raising questions about the sector's ability to generate jobs and recover in the near future. Nondudule also discussed the challenges posed by supply chain disruptions, rising input costs due to a weaker RAND, and ongoing global trade tensions affecting export sales. While she expects some easing of price pressures in the coming months, uncertainties remain regarding the extent of this alleviation. The conversation delved into the importance of addressing policy interventions and economic shifts to boost both domestic and export demand for manufactured goods. Nondudule emphasized the need for sustained improvements in electricity supply, infrastructure, and global uncertainties to support the manufacturing sector's recovery. Amidst concerns about South Africa's exposure to external risks, such as global trade tensions and strained relations with the US, Nondudule highlighted the significance of ongoing reforms and improvements in key sectors to enhance business confidence and drive growth. Overall, the challenges facing the manufacturing sector in South Africa require a multi-faceted approach, combining policy interventions, economic reforms, and global stability to foster a more conducive environment for growth and sustainability.