uth Africa’s private sector experienced its weakest performance in 11 months during December 2025, with business activity falling to its lowest point. This marks the third consecutive monthly decline in the Purchasing Managers’ Index (PMI), signaling a faster deterioration in operating conditions across Africa’s largest economy. A PMI reading below 50 indicates a contraction, and South Africa’s figure of 47.7 in December, down from 49.0 in November, clearly illustrates this downturn. The contraction was widespread across various sectors, with the sharpest decline seen since January of last year.
Challenging economic conditions and a noticeable drop in client demand were cited by firms as the primary reasons behind the decrease in output. This trend is further evidenced by a third consecutive monthly fall in new orders, reaching its most significant downturn since March 2024. Businesses reported reduced household spending, fewer corporate orders, and softer demand from international clients, contributing to this slowdown.
What is the Purchasing Managers’ Index (PMI)? The PMI is a key economic indicator that measures the economic health of the manufacturing and services sectors. A reading above 50 indicates expansion in business activity, while a reading below 50 signifies contraction. It is based on surveys of purchasing managers in private sector companies.
Total exports also saw a decline in December, reversing a marginal increase from the previous month and underscoring the weakening external demand that South African businesses are facing. This contrasts with other African economies, where growth has been more robust.
Among the eight major African economies tracked by S&P Global and Stanbic Bank surveys, South Africa was the sole country to record a PMI below the 50-point threshold. Uganda led the pack with the strongest expansion at 54.0, followed closely by Kenya at 53.7. Nigeria, Zambia, Mozambique, Egypt, and Ghana all reported figures above 50, indicating varying degrees of business activity expansion.
David Owen, senior economist at S&P Global Market Intelligence, noted that after a strong performance in the preceding quarters, the South African economy experienced softer conditions in the fourth quarter of 2025. He attributed the downturn largely to a pullback in demand, which intensified in December as customers reacted to higher price pressures and broader economic headwinds.
Owen further elaborated that firms adopted a more cautious approach to purchasing, with inventories also declining in December. While employment conditions saw a marginal improvement, this was mainly due to short-term hiring rather than a fundamental boost in job creation.
The South African Reserve Bank’s efforts to moderate inflationary pressures, with the annual inflation rate easing to 3.5 percent in November and a 25-basis point cut in the key repo rate to 6.75 percent, have not yet translated into stronger business activity.
Despite the current challenges, businesses in South Africa expressed a degree of cautious optimism for 2026. They anticipate a recovery in demand and improved operating conditions over the next 12 months. Survey respondents believe the current downturn will fade, citing hopes for reduced economic headwinds, stronger customer relationships, and a more supportive demand environment.
In contrast, Uganda demonstrated sustained improvements in output and new orders, leading to its overtaking of Kenya in business activity growth. The Uganda Stanbic PMI remained firmly in expansion territory, supported by robust consumer demand and rising business confidence, highlighting a resilient domestic economy.
Looking ahead, the performance of South African businesses will heavily depend on the effectiveness of economic policies aimed at stimulating demand and mitigating inflationary pressures. The upcoming months will be crucial in determining if the cautious optimism for 2026 translates into tangible improvements in business activity.
