Business
South African Manufacturing: Challenges Persist, but Optimism Grows for 2025 Recovery
South African manufacturers faced a volatile year in 2024, grappling with declining demand, weak production, and global logistical issues. However, optimism about the future is growing, with many in the sector hopeful for a recovery in 2025.
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) ended the year in contractionary territory, dropping 1.9 points to 46.2 in December 2024. The fourth quarter PMI averaged 49 points, slightly below Q3’s 49.8 but higher than the first half of the year.
Despite the challenges, the index measuring expected business conditions in six months rose by 5.2 points to 67.6 in December, signaling manufacturers’ growing confidence in 2025.
Key Challenges in 2024
- Declining Demand and Production:
- The business activity index dropped sharply to 40.3 points in December, indicating a significant pullback in production.
- New sales orders fell to 37.4 points, reflecting weak local and export demand.
- Employment Struggles:
- The employment index remained below the neutral 50-point mark for most of 2024, highlighting sustained pressure on job creation in the sector.
- Logistical Delays:
- The supplier deliveries index jumped to 56 points due to delays caused by logistical issues, both locally and globally.
- Rising Costs:
- The purchasing price index remained elevated at 60.4 in December, driven by higher fuel and LPGAS prices and a weaker rand.
Bright Spots for 2025
Amid the challenges, manufacturers have reasons to remain optimistic:
- Improved Business Expectations:
The index for expected business conditions in six months surged to 67.6, signaling optimism for a turnaround in 2025. - Resilience in Inventories:
Inventory levels held steady at 50.7 points in December, showing stable stock management despite declining production. - Hopes for Global Recovery:
A recovery in global markets and improved local demand could drive South Africa’s manufacturing sector forward.
Outlook for 2025
Absa and the Bureau for Economic Research (BER) noted that while 2024 was challenging, the year-end uptick in future expectations suggests that manufacturers are hopeful for improved conditions.
With sustained efforts to address supply chain issues and capitalize on new opportunities, South Africa’s manufacturing sector could experience growth in the coming year.
“The improvement in future expectations suggests manufacturers remain hopeful for a recovery in 2025,” Absa stated.
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