South Africa’s private sector is seeing some price relief, but the logistics crisis is causing major headaches.

The latest S&P Global PMI – a composite gauge of the operating conditions for the South African private sector – increased from 48.9 in October to the netual mark of 50.0 in November.

S&P Global said that both input and output costs rose at their softest rates since December 2020.

“According to surveyed firms, this was mainly due to an improvement in the exchange rate versus the US dollar, which was fairly mild but nonetheless helped lead to a softer rise in purchase costs. Lower fuel prices in December could help to bring inflation rates down even further,” David Owen, Senior Economist at S&P Global Market Intelligence, said.

The cooling of price pressures also supported weaker falls in output and new orders, but staff levels were cut for the first time since July.

However, the increase in the headline figures was also due to a sharp increase in supplier delivery times.

Although this normally indicates strong demand and thus contributes positively to the headline figure, supply chain constraints can also increase delivery times – this was seen in the ABSA PMI following the July 2023 truck attacks.

Supply chain disruptions in November were mainly due to the troubles at the nation’s ports, with the backlog of containers awaiting processing, meaning that firms had to wait longer for inputs.

“In fact, companies signalled the worst deterioration in vendor performance in 2023 to date.”

These disruptions had a major impact on the purchasing of inputs from firms during Q4, with the latest data showing the biggest drop since July 2021, S&P Global said.

“Downside risk is now arising from the port crisis in Durban, where tens of thousands of shipping containers are awaiting offloading, causing significant delays,” Owen added.

“Anecdotal evidence from companies indicated that these delays led to the steepest lengthening of delivery times in almost a year, contributing to falls in purchasing and output.”

“The crisis could, therefore, drag on private sector growth in the coming months if there is no improvement.”

Despite the crisis at the nation’s ports, business expectations did improve for the second consecutive month, with firms confident that output will increase in 2024.

Close to half of the panellists (48%) said they are optimistic that the picture of demand, supply, and inflation will improve.

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