Power-cut plans drag SA's factory sentiment to decade low

Sentiment in South Africa’s manufacturing industry fell to the lowest level in more than a decade in February as the prospect of continued power cuts and concern about the global economy weighed on confidence.

That makes the recovery of an economy that the government estimates expanded at the slowest pace in 10 years in 2019 even more challenging.

Absa Group’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, dropped to 44.3 from 45.2 in January, the group said in an emailed statement Monday. That’s the lowest level since August 2009. The median estimate of three economists in a Bloomberg survey was 45.1.

Rolling blackouts weighed on SA's economy in the final quarter of last year. The likelihood of power outages continuing for the next 18 months, as announced by the head of state-owned utility Eskom, dragged down four of the five main subcomponents of headline PMI in February. The business activity subindex dropped to 33.7 from 44.6 and that dragged down the employment subindex. New-sales orders slumped to 31.2 from 42.5.

Some respondents flagged electricity blackouts as a reason for the decline in activity, Absa said. Weakness in external demand also contributed to the drop in sales orders, according to the lender.

The manufacturing PMI has been below 50 for all but nine months of the past three years, indicating contraction in an industry that accounts for about 13% of South Africa’s gross domestic product.

There’s unlikely to be a turnaround soon, with the subindex tracking expected business conditions in six months’ time falling to 38.7 from 42.5. That’s the lowest level since February 2009 and the gauge is now at less than half of the level recorded in February 2018, when euphoria about Cyril Ramaphosa’s ascent to the presidency peaked.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
ZAR/USD
16.37
(-1.16)
ZAR/GBP
21.21
(-0.55)
ZAR/EUR
19.21
(-0.71)
ZAR/AUD
11.59
(-0.48)
ZAR/JPY
0.16
(-1.31)
Gold
1892.18
(-0.66)
Silver
24.00
(-1.19)
Platinum
869.00
(-0.63)
Brent Crude
41.09
(+1.96)
Palladium
2264.00
(-2.23)
All Share
53073.49
(-1.86)
Top 40
48672.62
(-1.79)
Financial 15
10092.07
(-3.92)
Industrial 25
73741.46
(-0.80)
Resource 10
49210.76
(-2.37)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, and I've gotten it.
24% - 104 votes
No, I did not.
51% - 221 votes
My landlord refused
25% - 107 votes
Vote