Business confidence in the manufacturing sector came under renewed pressure during the first quarter of 2026, with lacklustre demand weighing on sentiment.
According to the Q1 Absa Manufacturing Survey, the headline index number declined by 9 index points to 30 from the previous quarter. Sales volumes, orders and selling prices all experienced substantial declines.
When compared to the previous quarter, the index for Domestic Sales dropped by 14 points while Domestic Selling prices decreased by 15 points.
The declines in Export Sales and Selling prices were 16 and 9 index points respectively.
Domestic and Export orders dropped significantly with the indices declining 22 and 27 points respectively.
“The glimmer of hope that emerged during the last quarter of 2025 was short-lived, despite the many positive macro factors such as a stronger exchange rate, lower inflation rates and fuel prices supporting the local operating environment,” says Sachin Chanderdhev, sector specialist for manufacturing at Absa Business Banking.
“The findings underscore the fact that our manufacturing sector participates on a global stage and is therefore not immune to external shocks, with global players looking to redefine trading partners following the implemented tariffs and global market uncertainty. The decline in export activity experienced since last year is creating longer term strain on the sector.”
Despite ongoing demand pressures, the survey indicates that certain constraints have improved compared to the first quarter of 2025, with short-term interest rates and the general political climate improving by 5 and 6 points respectively.
Encouragingly, the index for Fixed Investments in 12 months, increased by 18 points and the expectations around constraints over the next 12 months also signal the possibility of gradual improvements in the operating environment.
“Even though the operating environment remains difficult, manufacturers continue to demonstrate resilience,” adds Chanderdhev.
Conducted between 12 and 23 February 2026 in partnership with the Bureau for Economic Research (BER) at Stellenbosch University, the survey reflects feedback from approximately 700 manufacturing businesses. The confidence index ranges from 0 (no confidence) to 100 (extreme confidence).
The decrease in confidence was pervasive across all major subsectors, except for the Transport sector, which experienced an increase to a score of 26 compared to 19 in the previous quarter – though still below the long-term average.
While the Food and Beverage sector, along with Transport, experienced an uptick in export sales as illustrated by a respective 15- and 13-point increase in their indices, both highlighted significantly lower selling prices.
Some respondents noted that cheaper imports are impacting their sales, thus creating strain on local demand.
Chanderdhev says more manufacturers are re-thinking their energy mix to combat rising electricity tariffs, while others are looking to adopt new technologies to improve throughput and efficiency.
“Unlocking efficiency, removing unnecessary cost and running lean operations are critical to remain competitive in an unpredictable operating environment.
“In addition to investing in renewable energy, clients are also looking to improve their water security with storage, recycling and water backup solutions. These investments aim to reduce operating costs, manage infrastructure-related risks and strengthen long-term competitiveness,” Chanderdhev adds.