South Africa’s private sector activity contracted in May as output and new orders plunged under the weight of surging fuel prices and escalating geopolitical uncertainty surrounding the Iran war, a business survey showed on Wednesday.
The S&P Global South Africa Purchasing Managers’ Index (PMI) fell below the critical 50.0 no-change threshold, dropping from April’s expansionary reading to signal a sharp reversal in the country’s economic momentum.
Firms reported that escalating global tensions disrupted supply chains and stoked inflation. Rising operating costs forced businesses to hike selling prices, directly depressing domestic demand and causing clients to pull back on new orders.
“The May survey highlights how vulnerable domestic demand remains to external shocks,” said David Owen, Senior Economist at S&P Global Market Intelligence. “Higher fuel prices and geopolitical anxiety squeezed corporate margins and chilled consumer spending.”
The downturn coincides with a tough macroeconomic environment. Statistics South Africa recently reported that consumer inflation accelerated to 4.0%, driven by a 35.4% jump in diesel prices that heavily impacted local logistics.
The South African Reserve Bank (SARB) has kept its benchmark repo rate steady at 8.25% to combat these persistent price pressures, further constraining borrowing and capital investment across the private sector.
The manufacturing and construction sectors bore the brunt of the May slowdown. Managers noted that defensive stockpiling of raw materials, triggered by shipping delays, tied up critical cash reserves.
Economists warn that the contraction threatens broader economic growth. High unemployment, which currently stands at 32.7%, leaves little room for the domestic economy to absorb sustained global supply shocks and elevated energy costs.
