Business activity and new orders have improved for the second month in a row, according to the latest Absa Purchasing Managers’ Index (PMI). The index, compiled by the Bureau for Economic Research, rose to 52.6 points in November, up from 50 in October, with an average level of 49.6 recorded in the third quarter. 

It’s not much, but against the backdrop of strikes at Transnet and beyond, and an unstable power grid, the slight expansion in Q4 is encouraging — and ahead of Bloomberg consensus expectations.

That uptick is likely to be short-lived as political uncertainty snuffs out the value of the rand.

Absa said next week’s official data on factory production in October — and the extent to which it was affected by the troubles at Transnet — will help to firm up this view.

Rolling blackouts hit new low

The bank said both business activity and new sales orders improved for a second consecutive month after they had plunged during September — the worst month of rolling blackouts since they began in 2007.

September 2022 saw 1,503GWh shed from the grid, which affected 572 hours of the month. By 5 October, an estimated 4,115GWh had already been load shed, which was far worse than that to date in 2021, in which a total of 1,776 GWh was shed, Engineering News reported.

South Africa’s next-worst month was July 2022, when 397 hours were affected by power cuts and 938GWh was shed.

Last month, new sales order volumes expanded for the first time since May 2022. Even though it improved, the bank said, the activity index remained stuck just below 50 points, while the employment index also lingered at a much lower level.

Visit Daily Maverick’s home page for more news, analysis and investigations

It has warned that higher demand and output levels would likely need to be sustained for some time for any improvement in staffing levels to occur. 

“Encouragingly, purchasing managers turned more upbeat about business conditions going forward. The index tracking expected business conditions in six months’ time rose to 51.7 from 49.2 in October.”

“The recent decline in the Brent crude oil price, as well as a somewhat stronger rand exchange rate (against the US dollar), bode well for the general downward trend to continue through the final month of the year. Still, with load shedding expected to continue, the (more) frequent usage of diesel-powered generators adds to the cost burden of producers.”

​​Lara Hodes, economist at Investec, said export activity had picked up month-on-month after the disruptions caused by the Transnet strike in October, which led to Transnet Port Terminals declaring a force majeure. 

“However, notwithstanding November’s more favourable performance, the weakening global growth situation continues to impede export potential. Indeed, flash PMI survey results for November for the US, UK and Eurozone paint a precarious picture.”

Citing S&P Global, Hodes said November saw business activity fall across the eurozone for a fifth consecutive month.

Diesel price relief

The PMI reading remained flat in November, having come down significantly from earlier in the year. But with persistent power outages, she said producers are having to run expensive diesel-powered generators that are weighing heavily on their overall cost base. 

“We are, however, expecting a marked diesel price cut in December which should provide some reprieve.”

The employment index picked up slightly last month to 45.7, after dropping to its lowest reading in two years (41.5) the previous month. 

“The index measuring expectations of business conditions in six months’ time rose by 2.5% points to 51.7, which is encouraging… however, the electricity supply predicament continues to weigh on confidence. Indeed, while electricity production and consumption numbers eased year-on-year in October, they still contracted by -3.8% y/y and -2.3% y/y respectively.”

And that was before reports of President Cyril Ramaphosa’s possible impeachment threat, which weakened the rand by over 4% by mid-afternoon today. BM/DM