South Africa’s manufacturing sector continued to struggle in May 2025, with factory conditions deteriorating further due to persistent power outages and weak domestic demand, according to the latest Purchasing Managers’ Index (PMI) published by Absa Bank on Monday, June 2. The seasonally adjusted PMI fell to 43.1 in May from 44.8 in April, remaining well below the neutral 50-point mark that separates expansion from contraction.
The May reading marks the third consecutive month of decline and the lowest level so far this year, underscoring the challenges faced by the country’s industrial sector. Absa noted that the ongoing electricity supply crisis — characterized by frequent load shedding — continues to weigh heavily on manufacturing output and business confidence.
“The index signals a sharp deterioration in manufacturing activity as electricity constraints and fragile domestic demand persist,” Absa said in its report. “Respondents cited major disruptions from load shedding, higher input costs, and reduced sales volumes.”
The electricity crisis, driven by operational failures and capacity constraints at Eskom, the state-owned power utility, has severely impacted business operations across South Africa. Manufacturing firms have been forced to scale down production schedules or invest in costly alternative power solutions, further squeezing profit margins.
The new sales orders index, a key subcomponent of the PMI, declined further in May, reflecting continued weakness in domestic and export demand. Business activity levels and employment indicators also dropped, suggesting limited hiring and reduced production volumes.
According to Absa, supplier performance worsened, and inventories remained under pressure as companies were unable to maintain stable stock levels amid erratic power availability and logistical challenges. Some manufacturers reported difficulty in sourcing raw materials due to delayed shipments and rising transportation costs.
Although the index measuring expected business conditions in six months improved slightly to 51.2 — up from 49.9 in April — this modest uptick was largely attributed to hopes that policy intervention or seasonal factors could ease the current disruptions. However, analysts caution that without structural reforms, a sustained recovery remains unlikely.
“The South African manufacturing sector is stuck in a pattern of underperformance,” said Thabi Molefe, an economist at Rand Merchant Bank. “Unless load shedding is resolved and demand conditions improve, we will continue to see sub-50 PMI readings in the coming months.”
Manufacturing accounts for roughly 13% of South Africa’s gross domestic product (GDP), and prolonged weakness in the sector could have broader implications for employment and investment. The country’s unemployment rate remains among the highest globally, and any further deterioration in industrial output could exacerbate social and economic pressures.
In response to the report, the Department of Trade, Industry and Competition acknowledged the seriousness of the decline and reaffirmed government plans to support reindustrialization. “We are intensifying efforts to stabilize the energy supply and incentivize investment in local production,” a spokesperson said.
Still, business leaders remain skeptical. The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) warned that unless tangible improvements are seen soon, more factories could face closure or downsizing. “Time is running out for meaningful recovery,” said SEIFSA CEO Lucio Trentini. “We need practical solutions, not promises.”
As South Africa grapples with a prolonged energy crisis and stagnant demand, the manufacturing sector’s outlook remains clouded by uncertainty, and industry voices are urging decisive action to halt further decline.
Source; Reuters
