South Africa’s manufacturing sector surges to 10-month high on export boost
The March 2025 ABSA Purchasing Managers’ Index shows tentative signs of recovery in South Africa’s manufacturing sector, with notable rebounds in business activity and export sales, despite the sector remaining in contractionary territory overall. But persistent headwinds such as load-shedding, port inefficiencies, and shaky South Africa-United States trade relations continue to weigh on employment, business confidence, and broader momentum. To unpack the latest PMI, CNBC Africa is joined by Sello Sekele, Economist at ABSA CIB.
Tue, 01 Apr 2025 11:48:02 GMT
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AI Generated Summary
- The March 2025 ABSA PMI indicates signs of recovery in South Africa's manufacturing sector, with improvements in business activity and export sales.
- Persistent challenges such as load-shedding, port inefficiencies, and global trade risks continue to impact the sector's performance.
- Manufacturers are cautiously optimistic about the future, with uncertainties surrounding Q2 performance and concerns about external factors influencing business conditions.
South Africa's manufacturing sector is showing tentative signs of recovery, as indicated by the March 2025 ABSA Purchasing Managers' Index (PMI). The PMI revealed notable rebounds in business activity and export sales, despite the sector remaining in contractionary territory overall. However, persistent challenges such as load-shedding, port inefficiencies, and uncertain South Africa-United States trade relations continue to impact employment, business confidence, and the sector's momentum. Selah Sekele, Economist at ABSA CIB, provided insights on the recent PMI data, highlighting both improvements and lingering concerns. While the rebound in the PMI suggests some progress, the sector still faces tough business conditions following several months of decline. Although the March uptick provides a glimmer of hope, the manufacturing output in Q1 2025 remains weak overall, with growth momentum showing signs of slowing down. Looking ahead to Q2, there are uncertainties about the sector's future performance, particularly as expected business conditions have declined to the lowest level since May of the previous year. Manufacturers appear cautious about the outlook, with sentiment reflecting concerns about external factors, such as global trade risks and trade tensions between South Africa and the United States. While domestic factors like load shedding have improved to some extent, the focus remains on export markets and the potential impacts of trade policies. Export sales have returned to expansionary territory, driven by markets like the U.S., Germany, and China. The resilience in export sales is a positive development, potentially signaling a positive trend for the sector moving forward. Additionally, improvements in the supply deliveries index suggest a possible easing of logistical challenges for manufacturers. The reduction in supply delivery times in March indicates a potential improvement in logistical issues, which have been a persistent concern for the sector. Despite challenges around ports and logistics, there are signs of gradual improvement, albeit not as fast as desired by businesses. Efforts to address logistical constraints, including reforms by Transnet, are expected to have a positive impact on rail volumes in the future. The overall picture for South Africa's manufacturing sector is a mix of progress and challenges, highlighting the need for ongoing monitoring and strategic responses to navigate the current environment. While improvements in certain areas are encouraging, it is essential for stakeholders to remain vigilant and proactive in addressing the lingering headwinds to ensure sustainable growth and resilience for the sector.