South African manufacturers are reporting modest improvements in production and orders, but weak demand, rising input costs and infrastructure constraints continue to weigh on employment and business confidence.
The country’s manufacturing sector moved closer to expansion in October, although the improvement has yet to translate into stronger hiring, highlighting the challenges businesses face in turning better activity into sustainable growth.
The Absa Purchasing Managers’ Index (PMI), compiled by the Bureau for Economic Research (BER), increased by 0.9 points to 49.6 in October from a revised 48.7 in September. This marked a second consecutive monthly improvement, although the index remained below the 50-point level separating expansion from contraction.
The employment index rose from 42.8 to 44.2 but remained firmly in contraction territory. The BER said employment remained particularly weak, while purchasing-price pressures intensified and expectations about future business conditions deteriorated. The results were released on 2 November.
Demand remains a challenge
The business activity index increased to 48.6 in October, while new sales orders rose to 46.8. Although both improved for a second consecutive month, their readings below 50 indicate that production and demand remain under pressure.
Export sales also strengthened, reaching their highest level since early 2025. However, the BER cautioned that this did not yet signal an outright increase in export orders, while domestic trading conditions remained difficult.
Absa’s third-quarter Manufacturing Survey, published in September, highlighted the extent of the challenge. Sachin Chanderdhev, Absa Business Banking’s sector specialist for manufacturing, said 66% of manufacturers identified insufficient demand as a key constraint.
The survey, conducted between 13 and 24 August, covered approximately 700 manufacturing businesses. Chanderdhev said elevated fuel, labour and raw material costs were also putting pressure on profitability and cash flow.
“Manufacturers thrive on operational continuity and maximum plant utilisation, and this is proving increasingly difficult in an environment characterised by subdued demand and weak sales,” he said.
Structural constraints continue to weigh
Industry organisations have also raised concerns about the structural barriers limiting manufacturing growth.
In July, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), the Manufacturing Circle and the Powerline and Substation Association (POLASA) highlighted more than a decade of rising electricity costs, logistics failures, infrastructure constraints, municipal decline and policy uncertainty.
They argued that these conditions had restricted investment, competitiveness and employment growth.
“Public procurement reform, infrastructure investment and industrial competitiveness remain among the most powerful levers available to government to stimulate domestic manufacturing demand and improve capacity utilisation,” the organisations said.
Input costs add to pressure
The October PMI showed renewed pressure on purchasing costs, with the purchasing-prices index increasing from 71.1 to 73.7. The BER attributed this partly to higher fuel prices and a weaker rand.
The supplier deliveries index remained elevated at 58.1, with manufacturers reporting logistical disruption, particularly at Durban harbour. Some businesses also experienced shortages of imported inputs and production interruptions.
These challenges increase operating costs and make it harder for manufacturers to meet delivery commitments.
The index measuring expected business conditions over the next six months declined to 51.7 in October from 55.3 in September, suggesting growing caution among purchasing managers.
