Johannesburg: South Africa’s private-sector economy came under renewed pressure in September, with business activity contracting at its fastest pace since December as weaker demand, supply-chain disruptions and rising fuel-related costs weighed on companies.

The S&P Global South Africa Purchasing Managers’ Index (PMI) fell to 49.0 in September from 50.5 in August. A reading below 50 indicates contraction, meaning private-sector business conditions deteriorated during the month.

New Orders Record Sharp Decline

One of the biggest concerns was the steep fall in new orders.

New business declined at its fastest rate in two and a half years, with companies reporting that customers were delaying spending because of uncertainty surrounding fuel prices and both domestic and international economic conditions.

The decline in demand affected business activity and encouraged companies to reduce their purchases of inputs.

However, export business provided some support, with new export orders increasing for the fourth consecutive month.

Fuel Costs Increase Business Pressure

Higher fuel prices emerged as a major challenge for South African companies.

Rising energy costs pushed input-cost inflation sharply higher, increasing expenses for businesses involved in transportation, manufacturing, logistics and other fuel-dependent activities.

Companies responded by increasing their selling prices at the fastest pace since June, indicating that part of the higher operating costs was being passed on to customers.

This creates an additional challenge for businesses because higher prices can further weaken consumer and corporate demand.

Supply Chains Face Fresh Disruptions

Businesses also reported worsening supply-chain conditions during September.

Supplier delivery times lengthened at their greatest extent since February 2024. Companies pointed to congestion at the Port of Durban, shipping disruptions and shortages of materials as major factors behind delays.

The disruption forced companies to manage inventories more cautiously, while stocks of purchases fell at their fastest rate in around one and a half years.

Employment Remains Relatively Stable

Despite the deterioration in business conditions, employment did not experience a major decline.

Companies reported only a slight reduction in workforce levels, suggesting that businesses have so far been attempting to absorb weaker demand without implementing large-scale job cuts.

This could change if weak orders and elevated operating costs persist for an extended period.

Business Confidence Shows Improvement

There was also a more positive signal in the latest survey.

Business expectations for the coming year improved for the third consecutive month, reaching their highest level since May.

Companies expressed hopes that supply-chain difficulties and fuel-price pressures would ease, allowing production and business activity to recover.

This suggests that businesses remain cautious about current conditions but are not necessarily expecting the downturn to continue indefinitely.

Economic Outlook Remains Mixed

The September PMI presents a mixed picture for South Africa’s economy.

On one side, domestic demand weakened significantly and supply constraints intensified. Higher fuel costs also increased pressure on company margins and consumer spending.

On the other hand, exports continued to grow and business expectations improved. Employment remained relatively stable, while companies continued to anticipate stronger activity if current supply and cost pressures ease.

The latest figures therefore point to a private sector facing considerable short-term challenges while maintaining some optimism about the months ahead.

Fuel Prices Could Remain Critical

The future direction of fuel prices will be particularly important for South African businesses.

Higher fuel costs can increase transportation expenses, raise production costs and ultimately push up prices throughout supply chains. Any sustained reduction in energy costs could therefore provide relief to businesses and consumers.

For now, however, companies are dealing with a combination of weak domestic demand, expensive inputs and logistical disruptions, making the recovery of private-sector activity uncertain.

The September PMI highlights the sensitivity of South Africa’s business environment to both domestic economic conditions and global energy and supply-chain developments.