South Africa’s private sector slipped back into contraction in May, ending four consecutive months of growth as rising fuel costs, weaker demand and geopolitical uncertainty weighed on business activity.
The latest S&P Global Purchasing Managers’ Index fell to 49.6 in May from 51.6 in April. A reading below 50 indicates contraction, suggesting business conditions deteriorated after reaching their strongest level in nearly four years the previous month.
The downturn was driven by declines in both output and new orders. Business activity fell for the first time in five months, while new orders contracted for the third time in four months and at the fastest pace recorded so far this year. Companies cited higher fuel costs, uncertainty stemming from the conflict in the Middle East and adverse weather conditions as key factors behind the slowdown.
The impact of rising energy prices was particularly significant. South Africa imports much of its fuel needs, making the economy vulnerable to global oil market disruptions. Higher fuel costs pushed up operating expenses for businesses and contributed to stronger inflationary pressures across the private sector.
Export demand also weakened. Businesses reported fewer orders from customers across Africa and Europe as rising prices and economic uncertainty affected purchasing decisions. The decline in international demand added to pressure on firms already dealing with higher input costs and softer domestic activity.
Data from the survey showed that inflationary pressures intensified further during the month. Input cost inflation accelerated to its highest level since mid-2022, prompting many companies to raise prices charged to customers. Selling price inflation consequently reached its strongest level in almost four years.
Despite the deterioration in business conditions, companies continued hiring. Employment growth accelerated to its fastest pace since September 2022 as firms sought to fill vacancies and prepare for anticipated future demand.
Perhaps the most surprising aspect of the survey was the improvement in business confidence. Firms expressed greater optimism about the year ahead, with sentiment reaching its highest level of 2026. Businesses pointed to expected new projects, marketing initiatives and hopes for more stable economic conditions as reasons for their improved outlook.
The latest PMI figures highlight the fragile nature of South Africa’s recovery. After a strong April performance driven partly by precautionary stock-building and stronger sales, the economy is once again facing headwinds from external shocks and rising costs. While business confidence remains resilient, sustained pressure from fuel prices and geopolitical tensions could continue to weigh on growth in the months ahead.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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