Skip to main content
Copyright © Aluma Capital (Pty) Ltd. All rights reserved.
 Aluma Capital (Pty) Ltd is a registered Financial Services Provider (FSP 46449) in terms of The Financial Advisory and Intermediary Services Act (37 of 2002)
Frederick Mitchell
November 13, 2024

Manufacturing Production

September 2024

In September 2024, South Africa’s manufacturing sector showed resilience despite a 0.8% annual decline, supported by a notable PMI increase. While challenges persist, sectors like food and beverages and petroleum products demonstrated growth, highlighting potential for recovery and ongoing job creation in this vital industry.

In September 2024, manufacturing production in South Africa experienced a 0.8% annual decline, mirroring a revised contraction of 0.8% in August. This downturn is surprising, given an increase of nearly 9 points in the Purchasing Managers’ Index (PMI), which rose from 44.2 in August to 53.3 in September.

The drop in production volumes is primarily due to an 18.7% decrease in the manufacturing of motor vehicles, parts, and accessories, resulting in a 1.7 percentage point reduction in overall manufacturing growth. On a positive note, the food and beverages sector saw a 1.2% annual growth, contributing 0.3 percentage points. Additionally, the petroleum, chemical products, rubber, and plastics sector grew by 3.1%, adding another 0.6 percentage points to overall manufacturing growth, which helped mitigate declines in other areas.

The seasonally adjusted value of sales in the manufacturing sector fell by 1.2% year-on-year in September. Quarter-on-quarter, seasonally adjusted manufacturing sales for the third quarter of 2024 also decreased by 0.9%. The primary contributor to this decline was the motor vehicles, parts, and accessories division, which decreased by 13.3%, contributing 2.2 percentage points to the quarterly contraction. Conversely, the largest positive contributors to quarterly growth were the petroleum and chemical products category, which rose by 3.2% and added 0.7 percentage points, and the food and beverages category, which increased by 2.4%, contributing 0.6 percentage points.

The manufacturing sector remains crucial to the South African economy, being the continent’s most industrialized sector. It currently employs approximately 1.6 million people and accounts for about 12.5% of South Africa’s GDP. Growth in this sector is essential for job creation and labour absorption in the economy.

However, business owners in the manufacturing sector remain cautious, adopting a “wait-and-see” approach towards investment and medium-term growth. Reports from the Reserve Bank and commercial banks indicate that corporate South Africa retains significant cash reserves. Companies appear to be awaiting clarification from the Government of National Unity (GNU) on industrial policy and the implementation of necessary reforms, which were recently promised by President Cyril Ramaphosa during the launch of Phase 2 at the Industrial Development Corporation (IDC) in October 2024.

Back to News

More Coverage

Gross Operating Surplus

Company is crucial for investors and the government, influencing investment potential and tax revenue. The latest data from Statistics South Africa shows a 2.9% quarterly decrease in Gross Operating Surplus (GOS) but a 4.5% annual increase, indicating profitability growth. Notably, sectors like mining and transport exceeded inflation rates, signaling positive market sentiment and potential for increased investment in South Africa over the medium to long term.

South African Economic Performance

South’s economy unexpectedly contracted by 0.3% in Q3 2024, with six out of ten sectors growing. The agricultural sector significantly declined by 28.8%. Positively, manufacturing and finance showed growth, contributing to overall resilience. However, consumer demand and elevated prices in the economy remain concerns, while expected growth for 2024 is estimated at just 0.7%. Addressing policy clarity and structural reforms could enhance business confidence and stimulate growth.

Private Sector Credit Extension (PSCE)

In October 2024, credit extended by South African financial institutions rose by 4.3%, with increasing demand in most categories, despite remaining low overall. Recent interest rate cuts totaling 50 basis points may enhance property and fixed asset purchases in 2025 as consumers gain more disposable income, potentially boosting overall demand.

Producer Price Inflation

Producer Price Inflation in South Africa saw a deflation of 0.7% in October 2024, exceeding analysts’ expectations. This decline was driven by significant price drops in coke, petroleum, and related products. While overall inflation may remain low in the short term, rising costs for intermediate goods and administered prices raise concerns. Persistently low inflation could lead to interest rate cuts, potentially boosting consumer and business demand in 2025.

Another 25 Basis Point Interest Rate Cut

The South African Reserve Bank cut the interest rate by 25 basis points, contrary to some expectations for a larger reduction. Inflation remains within the target range of 3% to 6%, and positive signs for growth include rising confidence and stable electricity supply. Despite subdued manufacturing production, increased disposable income supports demand, contributing to a gradual economic recovery.
0:00
0:00