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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
November 13, 2024

Manufacturing Production

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.

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Retail Sales Performance

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In September 2025, the Consumer Price Index (CPI) saw a modest rise to 3.4%, slightly up from 3.3% in August, yet just below the analysts’ forecast of 3.5%.

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Cautious Optimism Amidst Inflation and Reform Momentum
As the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) prepares to announce its interest rate decision later this week, market watchers are closely divided between expectations of a modest cut and maintaining the status quo. With approximately 70% of economists foreseeing a 25-basis point reduction from 7.00% to 6.75%, the prevailing sentiment reflects confidence in economic stabilization. However, a significant proportion remain cautious, suggesting that the SARB may choose to hold interest rates unchanged for another month, given the current inflation trajectory and recent developments in fiscal discipline.
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