The Q2 2025 Absa Manufacturing Survey reveals that uncertainty remains a dominant theme within the manufacturing sector, both domestically and globally.
Business confidence declined marginally to 33 points, down from 34 in Q1, an outcome some noted could have been significantly worse given prevailing conditions.
“During the survey period, GDP forecast downgrades, the evolving Budget 2.0/3.0 and political tension within the Government of National Unity (GNU) all contributed to heightened local uncertainty,” says Sachin Chanderdhev, sector specialist for the manufacturing sector at Absa Business Banking. “Internationally, geopolitical concerns also persisted, notwithstanding the high-profile White House engagement between South Africa and the US.”
Domestically, manufacturers also faced several challenges. These included subdued product demand, rising electricity tariffs and water supply disruptions – particularly in the Gauteng region, compounding to the sector’s strain.
As a result, both domestic and export sales deteriorated sharply, falling by 22 and 32 points respectively. Similarly, new domestic and export orders dropped by 25 and 35 points, indicating sustained demand-side pressure amid constrained consumer purchasing power.
Survey indicators tracking sectoral constraints including insufficient demand, political uncertainty and skilled labour shortages, also worsened during the period.
Conducted by the Bureau for Economic Research (BER) at Stellenbosch University, the quarterly survey was conducted between 7 May and 26 May 2025, drawing insights from approximately 700 manufacturing businesses. The confidence index ranges from 0 (no confidence) to 100 (extreme confidence).
The Transport, Capital and Chemicals subsectors were the main contributors to the overall dip in sentiment. Notably, confidence in the Transport subsector declined steeply to 3 points, down from 27 in Q1. Chanderdhev suggested that “this may reflect concern around US tariff increases and uncertainty regarding the continuity of multinational production operations in South Africa”. Conversely, the Furniture and Metals & Glass subsectors recorded confidence gains of 16 and 9 points, respectively.
Despite the challenging environment, a few encouraging developments emerged. A stronger rand, declining oil prices, no VAT increase and contained inflation contributed to a 25-basis point interest rate cut last month, which could help ease financial conditions for manufacturers.
There was also an unexpected, but welcome improvement in realised fixed investment, which increased by 3 points, suggesting that some manufacturers continue to invest in long-term resilience measures.
“Investments in renewable energy, energy-efficient machinery and backup water systems are becoming increasingly common as manufacturers look to realise cost efficiencies and mitigate market risks at the same time,” adds Chanderdhev. “While uncertainty persists, it is encouraging to see businesses adopting cost-saving innovations to strengthen their competitiveness and business continuity.”