South Africa’s private sector returned to growth in March as faster output and hiring outweighed a slump in export orders and weakening business confidence linked to the US-Israeli war in Iran, a survey showed on Tuesday.
The S&P Global South Africa Purchasing Managers’ Index rose to 50.8 in March from 50.0 in February. PMI readings above 50.0 indicate growth in private sector activity, while those below denote contraction.
Output grew at the fastest pace in six months, supported by new projects and stock replenishment among domestic-facing firms. However, new orders fell for a second consecutive month, and export sales posted their sharpest decline in just over two years, reflecting disrupted trade flows and weakening external demand linked to the escalating Middle East conflict.
S&P Global senior economist David Owen told Reuters that the latest data showed a bifurcated trend in the South African private sector. He explained that while domestic activity had benefited from new projects and restocking efforts, the external environment had deteriorated sharply due to the war’s impact on global trade and investor sentiment.
Employment increased at the quickest rate since May 2024 as firms built capacity for new projects, suggesting that some businesses remain optimistic about medium-term domestic demand despite the uncertain global backdrop. The jobs data contrasts with weaker readings in previous quarters, when hiring had been subdued due to load-shedding pressures and logistical bottlenecks at ports and rail networks.
Business confidence weakened further as concerns over the severity and duration of the Middle East war weighed on sentiment. Positive sentiment dropped to its lowest level since July 2021, even though approximately 32% of firms still expected output to rise over the next year. That figure, while representing a minority of surveyed companies, indicates that a substantial segment of the private sector continues to bet on a recovery in domestic conditions once external shocks subside.
Owen noted that the duration of the war would 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. South Africa’s manufacturing and export-oriented sectors have already shown signs of strain, with mining and agricultural exports particularly vulnerable to disruptions in global shipping routes and trade finance constraints linked to the conflict.
The PMI data comes ahead of the South African Reserve Bank’s next monetary policy committee meeting, scheduled for later in April. Analysts have suggested that a prolonged war could complicate the bank’s inflation outlook, particularly if oil prices remain elevated and supply chain disruptions push up imported input costs. The rand has also shown increased volatility in recent weeks as global investors adopt a risk-off stance in response to the widening conflict in the Middle East.