South African Business Activity Stabilised In August After Unrest – PMI

6 September 2021 – South African private sector activity stabilised in August after a sharp downturn in July amid civil unrest and Covid-19 lockdown measures, despite widespread supply chain issues, a survey showed on Friday.

IHS Markit’s Purchasing Managers’ Index (PMI) rose to 49.9 in August from an 11-month low of 46.1 in July, just below the 50-point that separates expansion from contraction.

This improvement was due to much softer falls in output, new orders and inventories, coupled with a renewed increase in headcount. The employment index rose to 50.8 from 49.2.

“With lockdown restrictions easing to Level 3, and the economy recuperating from social unrest, several firms registered an uptick in sales that helped them to expand output,” said IHS Markit economist David Owen.

In July, riots broke out in several parts of South Africa after former president Jacob Zuma handed himself in to start a 15-month jail term for contempt of court. The unrest swiftly degenerated into looting, which destroyed hundreds of businesses and killed over 300 people.

Owen added that demand and activity fell again in August, suggesting it would take several months for businesses to fully recover from the downturn, one that IHS Markit estimates would reduce GDP growth by 0.3% in 2021.

“A wide variety of input shortages were highlighted again, but particularly metals and electronic items. These continued to hinder supply chains and lead to both reduced output and higher backlogs,” Owen said.

The Delta coronavirus variant, which has spread rapidly in South Africa, has hindered supply chains across the world and is likely to disrupt businesses for some time. Source (Engineering News)