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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
March 27, 2025

Manufacturing Production

January 2025

Manufacturing production in South Africa decreased by 3.3% in January 2025, following a 1.2% contraction in December 2024. This decline was anticipated, as the Purchasing Managers’ Index (PMI) slipped from 46.2 in December to 45.3 in January.

The drop in production volumes can be attributed to several key factors:

  • Petroleum, Chemical Products, Rubber, and Plastic Products: Production fell by 9.1%, contributing -2.1 percentage points to the overall decline in manufacturing.
  • Motor Vehicles, Parts, and Accessories: This sector experienced a notable decrease of 10.1%, subtracting -0.8 percentage points.
  • Food and Beverages: Production in this sector declined by 3.2% year-on-year, contributing another -0.8 percentage points.

In contrast, the wood and wood products sector saw an increase of 5.6%, adding 0.6 percentage points to total output growth.

The seasonally adjusted value of sales in the manufacturing sector decreased by 2.0% in January 2025 compared to January 2024. Additionally, the rolling quarter ending in January 2025 showed a decline of 0.9% compared to the previous quarter ending in October 2024. Key contributors to this decline included:

  • Motor Vehicles, Parts, and Accessories: This sector fell by 3.1%, contributing -0.5 percentage points.
  • Basic Iron and Steel, Non-Ferrous Metal Products, Metal Products, and Machinery: This category decreased by 3.3%, adding -0.7 percentage points to the quarterly contraction.

Manufacturing remains a vital sector in South Africa, being the most industrialised country on the African continent. It employs approximately 1.6 million people and contributes about 12.5% to the nation’s GDP. Recent employment statistics reveal a positive trend, with job numbers rising from 1.635 million in Q3 to 1.675 million in Q4 of 2024. This increase is encouraging, particularly given the relatively stable electricity supply and consistent PMI figures in the final stages of 2024.

However, manufacturing business owners are adopting a cautious “wait-and-see” approach to investment and medium-term growth. Rising diplomatic tensions between Pretoria and Washington may lead to potential trade restrictions on South African manufactured goods in the near future. Reports from the Reserve Bank and commercial banks indicate that corporate South Africa is holding significant cash reserves, suggesting that companies are awaiting clarity from the Government of National Unity (GNU) regarding industrial policy, promised reforms, and resolutions to the ongoing standoff with the U.S.

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Producer Price Inflation

October 2025
In October 2025, producer price inflation rose to 2.9%, an increase from 2.3% in September. However, on a monthly basis, there was a slight decline in producer prices, down by 0.1%.

Retail Sales Performance

September 2025
Retail sales in South Africa rose by 3.1% in September, slightly exceeding market expectations of 3.0%, as anticipated by analysts for that month. This growth indicates a continuing recovery in consumer demand within the economy.

SARB Lowers Interest Rates as Stability Improves

The South African Reserve Bank (SARB) has taken a prudent and measured step by reducing its base interest rate from 7.0% to 6.75%, marking a significant moment in the country’s monetary policy trajectory. This decision, made by the Monetary Policy Committee (MPC), underscores the bank’s cautious optimism about South Africa’s economic outlook amidst a complex global backdrop.

Consumer Inflation

October 2025
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%.

Why Aluma does not Force an Interest Cut

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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