Business
South Africa’s Business Activity Hits Lowest Point Since 2021 as PMI Contracts in January

South Africa’s private sector experienced a sharp contraction in business activity in January 2025, according to the latest S&P Global Purchasing Managers’ Index (PMI). The index dropped to 47.4, down from 49.9 in December, marking the lowest level since July 2021.
A PMI reading below 50 signals a decline in economic activity, while a reading above 50 indicates growth. This downturn suggests South Africa’s economy faces a rocky start to the year, with concerns about its potential impact on first-quarter growth.
What’s Behind the Decline?
The contraction was driven by a significant drop in new orders and weaker demand across key industries, particularly the service sector.
“New orders dropped solidly, leading to a marked cutback in output, with weakness especially observed among service sector businesses,” said David Owen, senior economist at S&P Global Market Intelligence.
This decline indicates that businesses are struggling to attract customers, reflecting both domestic economic pressures and potential global demand slowdowns.
Key Factors Affecting Business Activity:
- Lower Sales: Companies reported reduced sales volumes, with many struggling to regain momentum after the holiday season.
- Weak Consumer Demand: High inflation, interest rate pressures, and economic uncertainty have dampened consumer confidence.
- Service Sector Struggles: The service industry faced the brunt of the slowdown, with many businesses reporting declining client activity.
Supply Chains Show a Silver Lining
Despite the overall downturn, the report highlighted an improvement in domestic supply chains. Some businesses noted that the decline in demand helped ease supply bottlenecks, providing vendors with more capacity to meet existing orders.
This could be seen as a small positive sign, suggesting that logistical challenges—which have plagued South African businesses in recent years—are stabilizing, at least temporarily.
What Does This Mean for South Africa’s Economy?
The sharp drop in the PMI raises concerns about South Africa’s economic performance in early 2025.
- Slower Growth: The contraction suggests that the economy may face sluggish growth in the first quarter.
- Business Confidence: Companies appear cautious about future investments and hiring due to uncertain market conditions.
- Potential Policy Impact: Economic policymakers may face pressure to stimulate demand and support struggling sectors.
According to Owen, unless consumer demand rebounds and business confidence improves, South Africa may struggle to achieve sustained economic growth in the coming months.
What’s Next?
While the current data paints a challenging picture, economists will be closely watching:
- February’s PMI data to see if there’s any recovery.
- Inflation trends and their impact on consumer spending.
- Government policy responses, especially regarding business support and economic reforms.
As businesses navigate this tough environment, resilience and adaptability will be key to weathering the storm.
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