South Africa business activity recovers in February 2023

By: Chime Amara

In a positive development for South Africa's economy, the country's business activity stabilized in February 2023, according to the Purchasing Managers' Index (PMI) released on Thursday.

The PMI, a gauge of private sector business activity, rose to 50.3 in February, up from 49.8 in January. Any reading above 50 indicates expansion in business activity, while a reading below 50 indicates contraction.

The rise in the PMI suggests that South Africa's economy may be starting to recover from the effects of the COVID-19 pandemic and recent unrest, which have taken a toll on businesses and the overall economy.

According to the survey, the main driver of the increase in business activity was the manufacturing sector, which saw a rise in output and new orders. However, the services sector remained weak, with business activity and new orders declining in February.

The survey also showed that employment in the private sector continued to decline, albeit at a slower pace than in previous months. This suggests that businesses are still cautious about hiring new employees, despite the stabilization in business activity.

Commenting on the PMI results, David Owen, an economist at IHS Markit, which compiles the survey, said: “The latest PMI data provide tentative signs of recovery for South Africa's private sector, with a return to growth in output and new orders registered in February.”

He further explained that the labour market remains a key concern, following the prolonged job losses which persisted for over eight successive months albeit at a softer rate. With this, the recovery in the private sector remains fragile, with businesses still reluctant to invest in new hires.

Despite the challenges facing the private sector, the stabilization in business activity is a positive development for South Africa's economy, which has struggled with low growth and high unemployment in recent years. If the trend continues, it could provide a much-needed boost to the country's economic recovery efforts.