South Africa Factory Activity Contracts on Mozambique Disruptions

AFRICAN BUSINESS AND ECONOMYFebruary 4, 2025 at 10:59 AM UTC

TLDR

South Africa’s factory activity declined for the third straight month in January
Trade disruptions with Mozambique, jet fuel shortages, and steel plant closures dampened business sentiment
Despite the downturn, business expectations for six months ahead remain positive at 64.9

South Africa’s factory activity declined for the third straight month in January, as trade disruptions with Mozambique, jet fuel shortages, and steel plant closures dampened business sentiment. Despite the downturn, business expectations for six months ahead remain positive at 64.9, though lower than 67.6 in December.

Absa’s Purchasing Managers’ Index (PMI) fell to 45.3 from 46.2 in December, marking the lowest reading since August. A PMI below 50 signals contraction, reflecting a slowdown in manufacturing momentum after last year’s rebound.

Mozambique’s post-election unrest disrupted border crossings and key rail corridors, leading to a month-long shutdown of critical trade routes. The planned closure of ArcelorMittal SA’s longs steel production is also a concern, with supply chain risks and cost pressures looming for manufacturers.

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Key Takeaways

South Africa’s manufacturing sector faces headwinds from regional trade instability, fuel shortages, and supply chain disruptions. The Mozambique crisis has hit exports, while the shutdown of ArcelorMittal SA’s steel plants may increase production costs. While PMI data signals contraction, businesses remain cautiously optimistic about the future. However, global trade uncertainties and regional instability could further impact supply chains and investment sentiment in 2024.

South Africa

Absa

Economy

Mozambique

ArcelorMittal SA