SA Private Sector Continues To Shrink As Rand Goes Weaker


SA private sector is still struggling to improve though it experienced a slight change in the month on July better than what was experienced in June says the IHS Markit/Standard Bank purchasing managers index (PMI) showed on Tuesday.

Standard bank revealed that the PMI rose slightly to 49.9 in July from 49.6 in June, proving a slight rate of stabilization of operating conditions, readings below 50 signals a deterioration in business conditions.

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The PMI only had a little positive contribution from the employment and inventory indices leaving SA private sector on a continuous deterioration.

“Despite the slight improvement in July’s PMI to 49.9, SA private sector continued to deteriorate, albeit at a slower pace in the month,” Standard Bank economist Kuvasha Naidoo said.

The PMI is a composite index, calculated as a weighted average of five individual components: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

Survey participants are of the view that  the drop of new business drop for the first time in three months were as a result of a low demand from export markets.

Despite the low turn out, companies hired more people in July, although the rate of job creation was fractional. Higher workforce numbers in turn helped firms to work through their backlogs.

The weaker rand and higher prices for raw materials continued to exert upward pressure on overall input costs. Purchase prices, selling prices, and staff costs rose at weaker rates.

“Overall input prices continued to rise, but at a slower rate, driven mainly by purchase costs as the pace of staff cost increases remained sticky. This also saw a moderation in the price increases passed onto consumers,” Naidoo said.

Companies reported a 15th consecutive monthly fall in activity in July, although the rate of decline was only fractional overall.

R9 Trn Investment Sector to Help Economy

Meanwhile, Deputy President Cyril Ramaphosa has called on investors to help transform the country’s investment sector.

Ramaphosa who was delivering a speech at the ABSIP Summit about transformation in the investment industry, on Monday, said part of South Africa’s key problems is that a third of the population of 57 million, are excluded from the economy.

He said the investment sector is responsible for capital worth R9trn, and the industry is responsible for “preserving the wealth” of South Africa.

“They are entrusted to “think outside the box” and use their wisdom to find creative solutions. With the economy coming under pressure, people who are well trained and have experience are needed to come forward and suggest solutions to get the economy moving and to address poverty, inequality and unemployment. Professionals should extend what they do beyond making profit and to developing the country,” Ramaphosa said.

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The deputy president went ahead to point out that government, business and labour ought to engage with each other to face the challenges, adding that the country demonstrated the power of collaboration when all three stakeholders came together to face ratings agencies to avoid a credit downgrade.