SA’s manufacturing sector dropped to its lowest level since the Covid-19 pandemic, with Absa’s purchasing managers’ index (PMI) falling 1.6 points to 43.1.
May marked the seventh consecutive month of contraction, despite a marginal improvement in activity and demand, according to the latest data released by Absa and the Bureau for Economic Research (BER) in Stellenbosch on Monday.
“[This emphasises] just how weak demand is for SA manufactured goods,” Oxford Economics chief economist Jee-A van der Linde said.
A sharp drop in the supplier deliveries index has dragged the headline PMI down.
Van der Linde said the manufacturing sector is expected to weigh on first-quarter real GDP growth, “and that looks likely to be the case in the second quarter as well”.
Stats SA is expected to release first-quarter GDP data on Tuesday.
The BER cautioned that the decline probably reflected weaker demand rather than improved logistics.
The report explained that since Covid-19, slower supplier deliveries had been driven more by supply-chain disruptions than strong demand, making the index harder to interpret.
It noted that while the issue had largely been resolved globally, it remained highly relevant in SA due to persistent logistical challenges.
“This month’s downtick (faster deliveries) could technically mean that logistical constraints are easing. Still, the respondents’ comments suggest this is unlikely and the downtick is driven by lower demand.”
Johann Els, Old Mutual’s chief economist, noted that Transnet’s systems were not running efficiently enough, adding that “ongoing issues around transportation and logistics remain a problem”.
Despite it being a year since the formation of the government of national unity (GNU) SA is still plagued by weak economic growth and the lack of job creation despite calls for business to invest.
Also the government had not yet turned around service delivery issues including the provision of water, the fixing of roads and traffic lights, and at local government level needed to encourage investment.
Transnet has been slow to undertake turnaround efforts to tackle operational and financial challenges, including infrastructure rebuilding and the development of private sector partnerships.
The entity recently secured a further R51bn in government guarantees, which it said would enable it to refinance maturing debt and access cash as well as improve and reform its operations.
The guarantee facility adds to the R47bn made available to Transnet in December 2023, most of which has now been used.
While there were faint signs of stabilisation in business activity and new sales orders in May’s PMI, those remained well below the neutral 50-point threshold.
The business activity index improved 3.4 points to 43.4, while new sales orders climbed 2.2 points to 38.3, lifted slightly by a modest recovery in local demand.
“However, [the improvement in business activity] was not strong enough to lead to an expansion in the sector. Load-shedding also remains a risk to manufacturing activity,” the report noted.
Export sales continued to deteriorate “at a rapid rate”, weighed down by regional trade disruptions, trade policy uncertainty and ongoing port inefficiencies.
The sector’s prolonged downturn continued to weigh on employment. The employment index fell to 40.0, and marked the 14th consecutive month of contraction in manufacturing jobs.
“Addressing the country’s unemployment crisis remains a key imperative of the government. However, to achieve this we need a substantial lift in confidence, driving investment and accordingly economic growth,” Lara Hodes, an economist at Investec, said.
Inventories also declined, with the index dropping to 44.7, as some firms reported shortages in materials.
One positive sign was the purchasing price index, which fell 7.9 points to 60.4, indicating that cost pressures were easing. While input prices continued to rise, the pace of increase had slowed, supported by lower oil prices and a stronger rand in early May, despite the Treasury’s announcement of an inflation-linked fuel levy increase in the national budget.
This marks a welcome relief after several months of rising cost pressure.
In a further encouraging sign, the index tracking expected business conditions in six months’ time surged by 13.9 points to 62.5 — its highest level since late 2024.
“Sentiment improved as global tariffs were suspended and businesses showed faith that local political disagreements on policy within the government would be resolved,” the report said.
Els concurred: “That’s a reflection of the better conditions around the global tariff war that has eased quite substantially.”
Update: June 2 2025
This story was updated to include more information on Transnet and economists’ comment.
With Hajra Omarjee
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