South Africa’s manufacturers remain confident about future business conditions, according to the latest Absa Manufacturing Survey. The survey, conducted by the Bureau for Economic Research at Stellenbosch University, showed that confidence held steady at 28 points in the third quarter of 2024. Manufacturers’ optimism was driven mainly by the formation of the Government of National Unity (GNU) after a peaceful election.
This positive sentiment offset challenges such as slowing demand and rising production costs. Justin Schmidt, executive for manufacturing sector at Absa Business Banking, said, “This level of confidence is the highest seen since the beginning of 2022 and bodes well for a further uptick in confidence in the fourth quarter survey results.”
The survey revealed that domestic and export sales declined by 7 and 25 points respectively, while seasonally adjusted production dropped by 17 points. Capacity underutilisation increased by 10 points, and total production costs per unit surged from 65 to 75 points quarter-on-quarter.
Despite these challenges, manufacturers reported a slight improvement in business conditions, up 2 points from the previous quarter. This was likely driven by a 12-point increase in export selling prices.
Manufacturers’ optimistic outlook persists
Supply chain constraints appear to have eased, with current raw material stocks relative to planned production increasing by 11 points and finished goods stocks relative to expected demand rising by 8 points. Looking ahead, manufacturers expect business conditions to improve over the next 12 months. This indicator increased by 32 points, supported by anticipated increases in both imports and exports, up by 5 and 7 points respectively.
Manufacturers also expressed an improved likelihood to invest in fixed assets, with this indicator showing a 34-point increase. Schmidt noted that in previous years, manufacturers focused on building resilience into operations by investing in backup power and renewable energy solutions due to load shedding. Now, they may start investing in improving capacity and efficiency in operations.
The survey reflects cautious optimism among South African manufacturers as they navigate evolving political and economic landscapes. Factors such as slowing inflation, nearing interest rate cuts, fuel price relief, and more than 155 days without load shedding are contributing to manufacturers’ positive outlook for the future.
