South Africa’s private sector returned to modest growth in March, supported by faster output and rising employment, but weak export demand and declining business confidence highlighted the lingering economic impact of the U.S.-Israeli war in Iran, a survey showed Tuesday.
The S&P Global South Africa Purchasing Managers’ Index (PMI) rose to 50.8 in March from 50.0 in February, marking a return to expansion after two months of stagnation. A PMI reading above 50 indicates growth, while readings below that threshold signal contraction.
The report showed output grew at its fastest pace in six months, as firms worked on new projects and replenished stockpiles. Employment also rose at the quickest rate since May 2024, reflecting companies’ efforts to build capacity in response to domestic demand.
However, the survey painted a mixed picture. New orders fell for a second consecutive month, while export sales posted their sharpest decline in over two years. Analysts attributed the slump in overseas orders to uncertainty and disruption stemming from the Middle East conflict, which has raised energy prices and unsettled global trade flows.
“The latest data showed a bifurcated trend in the South African private sector,” said David Owen, senior economist at S&P Global Market Intelligence. “Domestic production and hiring are expanding, but foreign demand is weakening, and business sentiment is under pressure.”
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Business confidence fell to its lowest level since July 2021. Only around 32 percent of firms expected output to rise over the next 12 months, indicating that concerns over the duration and severity of the Iran war are weighing heavily on expectations. “The duration of the war will be a key factor in determining the extent of its impact on South African companies, including how foreign demand reductions and price increases filter through to domestic activity,” Owen added.
The conflict has triggered higher oil prices and disrupted global shipping, creating cost pressures for manufacturers and logistics operators in South Africa. Firms relying on imported inputs are facing higher transportation and energy costs, while exporters contend with slower demand from key markets, adding a layer of uncertainty to the recovery.
Despite these challenges, the domestic economy has shown resilience. Infrastructure projects, retail spending, and investment in new production capacity have helped sustain output growth. Analysts note that the recovery is uneven, with the manufacturing and services sectors performing differently. While some segments are benefiting from government and private-sector initiatives, exporters, particularly in commodity-linked industries, are feeling the pinch from global market shocks.
The March PMI underscores the delicate balance facing South Africa’s private sector. Growth is being sustained largely by domestic activity, but external vulnerabilities remain significant. Elevated input costs and uncertainty in global trade could limit firms’ ability to expand further, even as domestic hiring rises.
Policy makers face the challenge of maintaining momentum in the domestic economy while mitigating the impact of external shocks. Support for energy-intensive industries, measures to stabilize fuel prices, and initiatives to safeguard trade flows could help buffer the private sector from the ripple effects of the Middle East conflict.
Overall, the PMI indicates that while South Africa’s private sector is cautiously expanding, the global geopolitical landscape — particularly the war in Iran — continues to pose risks to growth, export performance, and business sentiment. The coming months will be critical in determining whether domestic resilience can offset external pressures, or whether further disruptions will temper the modest recovery seen in March.
