Uncertain Future for South African Businesses Amid Declining US Relations

Business sentiment in South Africa has remained in negative territory for a consecutive fifth month as the anticipated recovery in demand falters due to uncertainties surrounding deteriorating relations with the United States.

According to Absa Group’s Purchasing Managers’ Index, developed by the Bureau for Economic Research, the index increased to 48.7 in March — still below the neutral 50 threshold indicative of expansion, compared to 44.7 in February, as reported by the Johannesburg-based bank in an emailed statement on Tuesday.

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“Feedback from participants highlights that logistical challenges at the ports persist, and deteriorating relations with the largest economy worldwide are creating uncertainty — although trade does not seem to be directly affected at this point,” Absa noted.

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Relations between South Africa and the US have become increasingly strained since President Donald Trump assumed office in January. The US president has criticized South Africa on multiple grounds, including its land-expropriation policy and a case brought before the International Court of Justice accusing Israel — a significant American ally — of genocide.

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In the first quarter of 2024, the PMI averaged 46.2, down from 49 in the preceding three months, according to Absa. The measure reflecting business activity rose to 48.3 due to increased demand, while new sales orders jumped to 48.9 from a previous 38.7, thanks to a rebound in export sales.

“Export sales made considerable strides in international markets, with sales returning to growth for the first time in four months,” said the bank. “This is remarkable given the ongoing global trade disputes and logistical challenges.”

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Anticipated business conditions for the next six months fell to 58, dipping below the 60-point mark and reaching the lowest level since May 2024, as the re-emergence of scheduled power outages and weakening ties with the US dampened sentiment.

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