South Africa’s private sector lost steam in August 2025 as overall growth slowed, even though firms reported their first output increase in four months amid softer cost pressures.
According to the latest S&P Global Purchasing Managers’ Index (PMI) survey, the headline reading slipped to 50.1 from 50.3 in July, remaining just above the neutral 50 mark that separates expansion from contraction.
“For the first time since May, companies in South Africa reported an increase in output levels during August,” the report said, pointing to a modest recovery in activity.
The upturn in business activity, which was the second-fastest in two years, was linked to stronger domestic demand and the start of new projects, though the pace was still described as fragile.
Supply conditions offered another bright spot.
Vendor performance improved for the fifth straight month, marking the longest run of gains in the survey’s history. Inventories also increased, supported by stronger input purchasing and faster deliveries.
August marked the fourth rise in buying activity in five months and the sharpest since October 2024, suggesting businesses are positioning for an eventual pickup in demand.
Stronger rand ease costs pressure
The rebound in output came as purchase pressures softened. Input prices rose at the weakest pace in ten months, with many respondents crediting the rand’s appreciation against the US dollar for lowering import costs.
Last month, South Africa’s currency gained 3% against the greenback, marking its best monthly performance in two decades.
Fuel and food prices, however, continued to climb, though wage growth eased, “with businesses reporting the softest increase in three months.”
The report noted that firms largely passed higher costs on to clients, although output price inflation remained weaker than the series average over the past two survey periods.
The softer trend suggests headline consumer inflation could ease in the months ahead, according to David Owen, Senior Economist at S&P Global Market Intelligence.
In Africa’s most industrialised economy, inflation accelerated to a 10-month high of 3.5% in July, up from 3% in June, as price pressures worsened across key categories in the consumer basket.
Employment falls amid softer demand
Overall momentum was dampened by a renewed decline in employment even as new orders continued to rise.
“Order book volumes increased in August, although the pace of growth lessened slightly from July,” the report noted. Some firms reported gaining new customers, but others pointed to low work levels and “challenging trading conditions.”
Outstanding business fell for the twelfth consecutive month, suggesting that demand pipelines remain weak, the report added.
With softer demand, firms chose not to replace departing staff, ending two months of job gains and signalling fresh pressure on the labour market. At 33.2% as of the second quarter of 2025, South Africa continues to hold one of the highest jobless rate in the world.
While domestic demand supported growth, international sales stayed under strain.
Export orders fell for a fifth straight month, with some respondents citing lost business from American clients due to higher tariffs.
On July 31, US President Donald Trump slapped a 30% tariff on all South African goods – the highest levy imposed on any African country. This is in addition to a 25% levy on automotive exports imposed earlier in April.
The latest trade policy, which took effect on August 7, has worsened the country’s economic outlook, but South African authorities have assured that trade negotiations are in the pipelines.
Outlook remains cautious
Sentiment across South Africa’s private sector remained “strongly” positive, though optimism dropped slightly from July.
Businesses see conditions gradually improving, but concerns over weak exports and subdued sales continue to weigh on expectations.
“Some firms expressed uncertainty about their growth prospects, citing potential impacts from US tariffs on trade performance,” the report said.
The August PMI underlines a fragile expansion.
Rand-driven cost relief has given firms breathing space, but tepid demand and renewed job losses show that growth remains uneven.
