Overall, the reading is a sour one for the manufacturing sector from which the survey that the index is based on is drawn. In March, the Absa Purchasing Managers’ Index (PMI) declined to 48.1 in March from 48.8 in February. That is not a steep fall but it was a further sag into negative territory below the neutral 50 mark. 

“This was the second straight month that the index pointed to a deterioration in business conditions in the manufacturing sector,” Absa said. “Domestic demand seems to be struggling, with some comments referring to local demand faltering due to load shedding.”  

The power crisis is cropping up in virtually every South African economic indicator and almost every financial results announcement from JSE-listed companies. 

The one sort of bright spot Absa said was the relative performance of the business activity subindex in the first three months of this year. It ticked up to 48.1 in March from 45.5 in February, when it tanked from 56.0 in January. 

“Due to a strong start to the year (also reflected in a solid monthly uptick in official manufacturing production during January), the average for the business activity index in Q1 is about 2 points above Q4’s average. This suggests that manufacturing output may improve in Q1 following the quarterly contraction recorded in Q4,” Absa said. 

That in turn holds out some hope that the South African economy has not tipped into recession after contracting by 1.3% in Q4 of last year. But given the continued intensity of the onslaught of rolling blackouts, a recession in the quarter that just ended remains a strong possibility.  

And the South African Reserve Bank growth forecast for all of 2023 is just 0.2%, while that of the International Monetary Fund (IMF) is 0.1%. In effect, almost no growth is seen this year, largely as a consequence of the power shortage.  

On other fronts, the PMI makes for mostly grim reading.  

“In contrast to business activity, the new sales orders index had a worse quarter compared to Q4. The index pointed to declining demand (although the pace of deterioration was modest) throughout the entire quarter … Encouragingly, the PMI’s index tracking export sales performed well through Q1 and rose to an almost two-year high in March.”  

That suggests domestic demand remains in decline while foreign demand for South African manufactured products is on the upswing. This is probably a reflection of the fact that the global economy, while facing plenty of headwinds and uncertainty, is generally still growing while South Africa’s is not.  

And worryingly, South Africa’s manufacturing sector is not manufacturing jobs.  

“The employment index fell for a third consecutive month to 45.4 in March. According to the latest jobs data (QES) from Statistics South Africa, the level of formal employment in the sector barely changed through 2022, and the recent PMI data does not indicate an improvement in job growth during 2023,” Absa said.  

The bottom line is that South Africa’s manufacturing sector remains under pressure. DM/BM