South Africa’s private sector activity picks up in September

Private sectors activity in Africa’s most industrialized nation, South Africa, declined at a slower rate in the month of September as the government relaxed strict lockdown measures imposed to stem the spread of the novel coronavirus.

The IHS Markit Purchasing Managers’ Index (PMI) climbed to 49.4 in September from 45.3 in the previous month, illustrating that firms within the sector have resumed operations.

However, the 49.4 figure is below the 50 mark that separates growth from contraction.

David Owen, an economist at HIS Markit said, “It was the highest reading since October 2019 and, when comparing with historical growth trends, was indicative of a rise in quarterly GDP.”

Since March, South Africa has had one of the world’s strictest lockdowns as the government battles to slow the spread of COVID-19 infections in the country. Despite South Africa having the fifth most confirmed cases in the world, President Cyril Ramaphosa loosed the pandemic restrictions in September to uplift businesses and avoid the economy reaching record contraction.

The PMI report shows that output and new businesses declined at much slower rates, and future expectations are rising as firms maintain confidence of higher demand.

On the other side, spare capacity led many companies to further reduce unemployment, a worrying note in a country that has the highest rate of economic inequalities in the world.

“Expansions in output and demand will be needed to help businesses revive job markets though, as employment continued to fall steeply. A rise in jobs will likely appear after an increase in economic activity, as firms will need time to recoup losses from the pandemic,” said Owen.

South Africa’s woes in creating employment started long before the pandemic, and the county reportedly shed more than two million jobs in the second quarter alone.

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