South Africa's manufacturing sector finds itself grappling with significant challenges brought on by declining demand and falling sales volumes.
Image: Simphiwe Mbokazi/Independent Newspapers
Since the start of 2026 South Africa's manufacturing sector finds itself grappling with significant challenges brought on by declining demand and falling sales volumes.
The latest Absa Manufacturing Survey, released by Absa Business Banking, for the first quarter indicates a troubling shift in sentiment, with the sector’s headline confidence index plummeting by nine points to a mere 30.
This decrease reflects a pronounced deterioration in business confidence, signalling tough times ahead for one of the country’s critical economic segments.
This trend aligns with data from Statistics South Africa, which reported that manufacturing production declined by 0.7% year-on-year in January 2026.
Further evidence of subdued activity comes from the S&P Global South Africa Purchasing Managers’ Index (PMI), which showed that manufacturing and broader private sector activity remained largely stagnant in February. Weak demand and declining sales offset gains from easing cost pressures and a modest recovery in employment.
Absa said the decline in confidence reflects weakness across key indicators, including domestic and export sales, new orders and selling prices.
The survey results point to a sharp contraction in demand, with notable declines in key areas. Domestic sales dropped by 14 index points, while export sales fell by 16 points. New orders declined more steeply, with domestic orders down 22 points and export orders falling by 27 points.
“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,” said 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.”
The decline in confidence was recorded across most subsectors, although some areas showed limited improvement. The transport manufacturing segment’s index rose to 26 from 19, while the food and beverage sector reported an increase in export sales. However, both sectors also recorded lower selling prices, suggesting pressure on margins.
Chanderdhev said manufacturers are adjusting their operations in response to rising costs and infrastructure challenges, including changes to their energy mix and the adoption of new technologies.
“Unlocking efficiency, removing unnecessary cost and running lean operations are critical to remain competitive in an unpredictable operating environment,” said Chanderdhev.
“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.”
The survey also highlights increased competition from cheaper imports, which is eroding domestic demand and prompting manufacturers to reassess pricing strategies and operational efficiency.
Despite the current pressures, firms are continuing to invest. The index for expected fixed investment over the next 12 months increased by 18 points, indicating that some businesses are positioning for a potential recovery.
“Even though the operating environment remains difficult, manufacturers continue to demonstrate resilience,” adds Chanderdhev.
Energy and water security remain key priorities, with companies investing in renewable energy, storage, recycling and backup systems to mitigate risks linked to infrastructure constraints.
Respondents also reported modest improvements in short-term interest rates and the political environment, which could support more stable operating conditions in the near term.
While challenges persist, Absa said manufacturers are adapting by adopting leaner operating models, reducing costs and seeking new ways to remain competitive in an uncertain global market.