South African businesses improve in March

South African businesses improved in March despite the disruptions caused by the Middle East war.

The S&P Global South Africa Purchasing Managers’ Index (PMI) rose to 50.8 in March from 50.0 in February. This was the first upturn in business conditions for six months.

Four out of the five sub-components provided a positive impact on the PMI’s direction, although one of these, suppliers’ delivery times, was due to increased constraints on shipping.

The BER manufacturing PMI rose to 49.0 in March from 47.7 in February. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

March components

South African businesses improve in March due to various factors. The improvement among South African businesses resulted in a rise in employment. Businesses also built up inventories during March. Total inventories rose for the first time in four months and at the fastest rate since May 2025.

However, the war in the Middle East contributed to supply chain stresses. The resulting uncertainty created client hesitancy. Consequently, this affected new orders.

Input price inflation accelerated, driven by rising fuel prices, a weaker rand due to a stronger US dollar and changes to the minimum wage. In response, output charges were lifted to the greatest extent in just over a year.

Where output was lifted, companies reported taking on new projects and renewed efforts to build stocks. New project starts were also a factor behind an increase in staffing capacity. Surprisingly, the rate of job creation was the strongest observed since May 2024.

Negative impact of war

While the March survey data signalled a stronger upturn in general private sector business conditions, there were some signs that heightened economic uncertainty and international supply chain disruptions due to the war in the Middle East had disrupted South African companies.

S&P Global said the first signal was a moderate but quicker decline in new orders. This was driven by a fall in export sales that was the most pronounced in just over two years. This may be due to hesitancy amongst foreign clients. Additionally, volatile exchange rates resulted in a loss of orders, according to panel members. A rise in fuel prices may have weakened demand.

Overall delivery times lengthened in March, with the rate of increase rising to a 16-month high. Firms widely noted disruptions to sea freight linked to the Strait of Hormuz and associated supply bottlenecks.
Input delays contributed to the slowest reduction in backlogs of work for six months. Input price inflation accelerated sharply in March, driven by the fastest increase in purchase prices since August 2024.

David Owen, Senior Economist at S&P Global Market Intelligence said: “Going forward, the duration of the war will be a key factor determining the extent of the impact on South African companies, including how much a drop in foreign demand and a mark-up in prices filters through to domestic activity.”