SA manufacturer mood turns upbeat on stronger activity

Sentiment among South Africa’s manufacturers turned positive for the first time in eight months in December, propped up by more robust business activity and less intense rolling power cuts during the festive season.

Absa Group’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, climbed to 50.9 from 48.2 in November, the lender said in a statement on Monday.

The gauge, which tracks manufacturing sentiment in the country, rose above the 50 mark for the first time since April, effectively escaping a contraction in an industry that accounts about 14% of Africa’s most industrialised economy.

Business-activity push

The advance was largely driven by an increase in the business-activity index which rose to 51.4, up from 46 the prior month. Conversely, new-sales orders declined to 46.3 from 46.6.

Although South Africa has felt the impacts of rolling power outages less harshly owing to businesses going the self-generation route, logistical woes brought on by state railway and ports operator Transnet have added to the cost of doing business and continue to weigh on profitability.

During the period, state power utility Eskom Holdings suspended power rationing, known locally as load shedding, in the latter half of December, only reinstating it this month.

The lender said sentiment has surprisingly turned more positive over the longer term, with the gauge tracking expected business conditions in six months’ time increasing by 16.9 points to 57.9, the best level since January 2023.

“It could reflect some hope that the worst of the local rail and port challenges will be behind us by mid-2024 and that load shedding could be less intense than last winter,” it said. “While purchasing managers are notably more optimistic than through most of 2023, they are still not excessively upbeat.”