Absa said manufacturing businesses across the nation faced deepening challenges, most notably illustrated by the sharp decrease in both business activity and new sales orders.
Image: David Ritchie/Independent Newspapers.
April proved to be a challenging month for South Africa’s manufacturing sector as the latest Purchasing Managers' Index (PMI), conducted by the Bureau for Economic Research (BER) and sponsored by Absa, reported a significant decline, dropping to 44.7 points from March's 48.7.
This latest survey reflected mounting concerns among industry participants, underpinned by global trade tensions and a turbulent local political environment.
Manufacturing businesses across the nation faced deepening challenges, most notably illustrated by the sharp decrease in both business activity and new sales orders.
The business activity index nosedived from 48.3 to a concerning 40, whilst new sales orders fell even more dramatically by 12.8 points to a subdued 36.1, indicating waning demand both domestically and internationally.
The BER highlighted worrying trends, noting that the index tracking export sales has returned to contractionary levels, aggravated by excessive rains that hampered production for some manufacturers.
"Global tariff developments and local political uncertainties related to the VAT saga and ongoing government disagreements undoubtedly weighed on sentiment," Absa explained in a statement.
Adding to the tension, U.S. President Donald Trump announced sweeping tariffs on most imports to the United States in early April, initiating a contentious trade war with China. Although he later paused the implementation of the most severe tariffs for 90 days, businesses worldwide remain apprehensive, uncertain of what the future holds amidst this volatility.
In South Africa, domestic political infighting reached a peak when the finance minister abandoned a proposed increase in value-added tax (VAT), necessitating a new budget presentation next month. The uncertainty surrounding these developments has clearly influenced the mood within the manufacturing sector, with the PMI remaining in contraction territory for the sixth consecutive month.
Interestingly, the suppliers’ delivery index saw a slight increase of 2.5 points to 56.6, signalling a slowdown in delivery times, which the BER interpreted as an increase in bottlenecks within supply chain processes.
"These delays are occurring in a low-demand environment, making recovery a formidable challenge," the BER noted.
As for employment, the index slipped further into contraction at 42.9, marking thirteen months of negative growth in this regard. With GDP growth remaining lacklustre, a lift in sentiment —alongside investment and economic growth— is crucial to fostering a sustainable increase in employment opportunities.
On the cost side, purchasing prices surged to 68.3 from 64.5 as the rand weakened against major currencies, hitting nearly R20/USD at one point in April. Though fuel prices saw a dip during the month, the cost of imported materials significantly increased, further squeezing manufacturing margins.
In a particularly grim sign, the index measuring expected business conditions in six months tumbled into contractionary territory for the first time since November 2023.
Increased negativity in respondents’ remarks during the month reflects heightened uncertainty driven by both the international trade war and decidedly adverse local developments, including scheduled power cuts and unprecedented rainfall.
As the manufacturing sector grapples with these multifaceted challenges, stakeholders are left wondering what the future holds. With both global and local forces conspiring to stifle growth, now is a pivotal juncture for South Africa's economic landscape.
BUSINESS REPORT