At KeyToFinancialTrends, we note that September became a landmark month for the South African economy: the PMI index rose to 50.2 from 50.1 in August, marking an improvement in private sector conditions for the fifth consecutive month. For an economy that has only recently been grappling with high inflation, power supply disruptions, and unstable demand, this signal can be seen as positive. Yet at the same time, we observe that businesses remain cautious and are not ready to embrace an optimistic outlook for the near future.
The main drivers of improvement were a combination of factors: growth in output, an influx of new orders, and a noticeable easing of price pressures. In September, only 3% of companies reported cost increases compared with the previous month, the lowest level in nearly a year. At KeyToFinancialTrends, we emphasize that both the strengthening of the national currency against the U.S. dollar and optimization of labor costs played an important role here. However, the sustainability of this trend raises questions, given the weak investment climate and high dependence on global conditions.
Despite short-term improvements, business sentiment remains bleak. Forward-looking expectations dropped to their lowest level since 2021. Companies openly cite political instability and regulatory uncertainty as key restraining factors. At KeyToFinancialTrends, we see this as a critical signal: even as macro indicators improve, confidence among entrepreneurs has not returned, and without it, long-term investments remain under threat.
On the inflation front, the situation looks more encouraging. Annual consumer price growth slowed to 3.3% in August, down from 3.5% a month earlier, and below most analyst forecasts. We note that the gradual decline in inflation could give the central bank some room for monetary easing. However, weak labor market dynamics limit the overall optimism. Employment fell for the second consecutive month, primarily due to difficulties in finding replacements for departing staff. Although the pace of job losses has slowed, the problem remains systemic.
Exports also deserve attention. In September, for the first time since March, export orders grew. The key driver was demand from African markets, while orders from the U.S. and Europe continued to decline. At KeyToFinancialTrends, we stress that this geographic reorientation is important for the economy’s resilience, but it also limits diversification, since regional demand cannot fully replace global markets.
There are also structural positives: supply chains are improving, with delivery times shortening for the sixth consecutive month – the longest such streak in the history of the survey. This indicates a gradual normalization of logistics, which had been one of the main bottlenecks in recent years.
Our conclusion is clear: the September PMI shows that the South African economy is staying afloat but has not yet entered a confident growth trajectory. Better inflation dynamics and supply chain improvements create a foundation for gradual recovery, but business pessimism, labor market weakness, and political risks prevent any strong long-term optimism. At KeyToFinancialTrends, we forecast that growth will remain symbolic in the coming quarters. We recommend investors focus on sectors with relatively stable demand – agriculture, services, and African export – while construction and capital-intensive industries will remain under pressure.
For the economy overall, the September PMI rise is more a signal of stabilization after a period of turbulence than the start of a full-fledged growth cycle. We believe that only a combination of political stability, structural reforms, and renewed investment flows can turn this “point of balance” into a sustainable development trajectory.
