Following an already disappointing start to the year with flatlining economic growth in the first quarter, the latest figures released on Tuesday, 10 June, indicate that South Africa’s economic outlook remains under significant pressure. The country’s manufacturing sector, which is often a bellwether for broader economic performance, is showing clear signs of weakness heading into the second quarter of 2025. This fresh wave of data signals that the country’s industrial engine is sputtering, with little indication of an imminent turnaround.
Key Takeaways
- Manufacturing Sector in Prolonged Decline: South Africa’s manufacturing output fell by 6.3% year-on-year in April 2025, marking the sixth straight month of contraction. This decline was broader and deeper than expected, signalling entrenched weakness across multiple industrial segments.
- GDP Growth Outlook Deteriorates Further: With manufacturing continuing to underperform and other sectors showing minimal improvement, second-quarter GDP is likely to follow Q1’s disappointing 0.1% growth. Revised forecasts now suggest GDP growth may struggle to reach even 1% for 2025.
- Urgent Need for Economic Reform: Structural challenges, poor policy execution, and weak investor confidence are limiting South Africa’s economic potential. The country requires consistent growth above 3% to meaningfully reduce unemployment and stimulate investment, yet continues to fall well short.
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Manufacturing Sector Contracts Further in April
According to data published by Statistics South Africa (Stats SA), manufacturing output shrank by a concerning 6.3% year-on-year in April, deepening concerns about the sector’s contribution to the national economy. This drop follows a downwardly revised decline of 1.2% in March, reinforcing the consistent weakness in industrial production. The scale of the decline was more severe than what market analysts had projected, with most expecting a fall of around 4.5%. The shortfall suggests that macroeconomic risks are being underestimated, and the real economy is grappling with deeper inefficiencies. This miss has intensified worries that South Africa’s industrial base is facing deeper structural challenges.
Six Straight Months of Year-on-Year Declines
April marked the sixth consecutive month of annualised decline in the manufacturing sector, despite a short-term improvement of 1.9% on a month-to-month basis. This marginal monthly recovery, however, does little to reverse the broader trend of contraction. The last time the manufacturing industry recorded positive year-on-year growth was back in October 2024, when output rose by a revised 1.9%, indicating that momentum has since been lost. The sustained pattern of decline is now raising red flags about the sector’s long-term competitiveness and its ability to withstand external shocks.
Three-Month View Shows Sector in Recession
When evaluating the performance over a rolling three-month period, the data clearly point to a sector in entrenched recession. The widespread nature of the decline in April suggests that the challenges are not isolated to a single industry but affect the manufacturing sector as a whole. All sub-sectors, with the exception of glass and non-metallic mineral products, posted year-on-year decreases, painting a picture of broad-based strain. This across-the-board weakness indicates systemic issues such as weak demand, supply chain disruptions, high input costs, and deteriorating investor confidence.
Food, Beverages, and Metal Manufacturing Drag Down Output
Among the hardest-hit segments were food and beverages, along with basic iron and steel, non-ferrous metal products, metal products, and machinery. The food and beverages category dropped by 7.6% year-on-year, while the metal and machinery segment contracted by 6.3%, together shaving 3.2 percentage points off the overall manufacturing index. Within the food and beverage division, it was the beverages and other processed food sub-categories that contributed most significantly to the decline, indicating weakening consumer demand or supply-side bottlenecks in these areas. The fact that staple sectors like food and steel are underperforming suggests deteriorating household spending power and serious disruptions in industrial demand.
Automotive and Petrochemical Segments Also Underperform
In addition to the food and metal sectors, the automotive and transport equipment grouping, specifically motor vehicles and parts, as well as the petroleum, chemicals, rubber, and plastics segment, exerted further downward pressure. Combined, these areas removed another 2.2 percentage points from the top-line manufacturing performance, showing that even traditionally resilient industries are under strain. The automotive sector, once a stronghold of industrial output and employment, is now a casualty of muted consumer sentiment and global supply instability.
Business Activity Indices Signal Worsening Conditions
The downturn in physical production is mirrored by survey data, such as the Absa Purchasing Managers’ Index (PMI), which showed that both business activity and new sales orders continued to weaken in April. The new sales orders index suffered a sharp drop of 12.8 points, settling at a muted reading of 36.1, well below the neutral 50-point threshold. This slump reflects deteriorating domestic demand and worsening export conditions, both of which are weighing heavily on manufacturing businesses. Additionally, indicators tracking export sales slipped back into contraction, underlining the broader global slowdown’s impact on South African trade. The collapse in new sales orders reveals just how fragile the operating environment has become, with confidence from buyers drying up across both local and international markets.
Q2 GDP Outlook Worsens Amid Weak Sector Performance
The lacklustre manufacturing data has serious implications for South Africa’s second-quarter GDP figures. Preliminary indicators, such as May’s PMI release, show that conditions in the manufacturing sector have not materially improved, suggesting that the poor performance seen in April could persist throughout the quarter. This follows a weak first quarter in which manufacturing was already a drag on the country’s total GDP output. If this trend continues, it may result in South Africa slipping back into technical recession territory by mid-2025.
Agriculture the Only Bright Spot in Q1
In the first quarter of 2025, South Africa managed to avoid economic contraction with a narrow 0.1% increase in GDP, which was largely supported by a strong showing from the agriculture sector. This modest growth figure was seen by the government as a success, though it masks underlying weakness in several key industries, particularly manufacturing and services. Without agriculture’s strong performance, the country would likely have recorded negative GDP growth, exposing the fragile state of the broader economy.
Revised Growth Expectations Reflect Bearish Outlook
At the beginning of the year, South Africa’s economic planners had forecast GDP growth of around 2% for 2025. However, that optimistic outlook has been repeatedly downgraded due to a range of external shocks, including escalating trade tensions and tariffs driven by the United States, which impacted global demand. Although some of these tensions have since calmed, their effects on economic confidence and investment remain deeply rooted, contributing to the downward revision in forecasts. The volatility of the global environment has made economic planning increasingly difficult, leaving the country exposed to forces beyond its control.
Forecasts Slashed as Confidence Erodes
Initial GDP expectations were quickly trimmed to 1.5%, and now most major institutions, including the International Monetary Fund (IMF), have further reduced their projections to around 1%. Some economists have even warned that achieving 1% growth could prove difficult, considering the slow implementation of structural reforms and persistent issues with economic governance and policy execution. These concerns are particularly acute when considering South Africa’s long-standing issues with public sector inefficiencies and political gridlock. With reforms stalling and private sector confidence waning, the country appears stuck in a cycle of low growth and limited recovery potential.
Decade of Weak Growth Undermines Recovery Prospects
Over the past ten years, South Africa has failed to generate the kind of growth needed to meaningfully improve living standards or reduce unemployment. On average, GDP growth has hovered at just 0.7% per year, according to data from the OECD. This prolonged stagnation has compounded socioeconomic challenges and left the country vulnerable to both internal and external shocks.
The failure to raise growth over a full decade is now being felt most acutely by young jobseekers and low-income households, who are bearing the brunt of policy inertia.
Minimum Growth Threshold Needed for Economic Turnaround
Analysts widely agree that for South Africa to break this cycle and create the foundation for sustainable economic recovery, GDP growth of over 3% per annum is required. This level of expansion is viewed as the minimum necessary to stimulate meaningful job creation and investment, as well as to provide relief to the millions of unemployed South Africans currently shut out of the formal economy. Without urgent and credible policy shifts, this level of growth will remain elusive, risking further economic decay and social instability.
Conclusion
South Africa’s economy is under mounting pressure as sustained declines in manufacturing and sluggish GDP growth point to a deeper crisis. Despite a temporary boost from agriculture in the first quarter, the broader economy remains stagnant, with weak domestic demand, falling export orders, and shrinking industrial output. Growth forecasts have been slashed, and without decisive policy action to address structural inefficiencies and restore confidence, the country risks slipping further into prolonged economic stagnation.
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