Sentiment in South Africa’s manufacturing industry may worsen due to power cuts.
A gauge tracking expected business conditions in six months’ time, as part of Absa Group Ltd.’s Purchasing Managers Index, fell to 45.9 in December from 47.4 in previous month, the Johannesburg-based lender said in an emailed statement Wednesday. That compares with 67.2 points at the start of 2019, a year in which factory output contracted for five straight months. The overall PMI dropped to 47.1 from 47.7 in November.
The return of rolling blackouts in December “likely soured expectations,” Absa said. There is also concern that export demand could continue to falter in the first half of the year, the bank said.
Eskom Holdings SOC Ltd., which generates about 95% of the country’s electricity, implemented its deepest power cuts yet early in December and resumed outages at the weekend.
The electricity-supply disruptions, persistent weak domestic demand and strife in the global economy already weighed on South African manufacturing last year. The sector accounts for 13% of gross domestic product. The subindex tracking business activity fell to the lowest level in almost three years last month, with survey respondents blaming electricity disruptions for lost production time, Absa said.
Blackouts threaten to further drag on Africa’s most industrialized economy, which is stuck in the longest downward cycle since 1945. GDP hasn’t expanded at more than 2% annually since 2013 and growth will only reach 1.2% this year, according to government forecasts.