Business activity in Africa’s largest economy nears 4-year high despite Iran war shocks

….South Africa, Nigeria and Kenya record improved PMI readings in April

Private sector activity in South Africa improved in April, with business conditions strengthening to near a four-year high despite mounting disruptions from the Middle East conflict.

The latest Purchasing Managers’ Index (PMI) released by S&P Global on Wednesday showed the headline index rose to 51.6 from 50.8 in March—the highest level since August 2022—marking a second consecutive month of expansion. A reading below 50.0 indicates contraction.

As a high-frequency gauge of economic momentum, the PMI often mirrors broader shifts in GDP, pointing to a modest recovery in Africa’s most industrialised economy even as external shocks intensify.

According to the report, firms faced a sharp increase in input costs, driven largely by higher fuel prices and supplier charges. “Cost inflation surged to a 30-month high, prompting businesses to raise selling prices at the fastest pace since August 2024.”

Despite these pressures, demand improved for the first time in three months, with some customers accelerating purchases amid fears of further supply disruptions. This supported the strongest rise in output in almost a year, alongside faster employment growth.

Since February, the escalation of tensions involving the United States, Israel and Iran has pushed global crude prices above $100 per barrel, heightening concerns over supply disruptions—particularly around the Strait of Hormuz, a key transit route for global oil shipments.

For African economies dependent on imported fuel, the impact has been immediate. Higher pump prices are feeding into transport, food and production costs, eroding purchasing power and threatening to reverse recent disinflation gains.

In South Africa, inflation edged up to 3.1 percent in March from 3.0 percent in February, according to Statistics South Africa, even before the full pass-through of higher oil prices.

To cushion consumers, the government extended fuel tax relief measures, maintaining a R3 per litre reduction in petrol levies until June while deepening diesel support. The intervention is expected to cost the fiscus about R17.2 billion, underscoring the growing trade-off between inflation control and fiscal discipline.

“A sharp increase in fuel prices adds to the short-term risks faced by companies, as overall input cost pressures soared to a 30-month high,” said David Owen, senior economist at S&P Global Market Intelligence. “With firms raising charges at the fastest pace since August 2024, it remains to be seen how demand will hold up once stockpiling subsides.”

Nigeria, Kenya show divergent momentum

Business activity in Nigeria and Kenya also reflected the uneven impact of inflation and supply shocks across the continent.

Kenya’s PMI rose to 49.4 in April from 47.7 in March but remained below the 50 threshold, signalling a second consecutive month of contraction. However, the pace of decline softened, with firms reporting improved client interest, product innovation and stronger marketing efforts.

Still, weak demand persisted as rising fuel costs dampened consumer spending. Inflation in East Africa’s largest economy climbed to 5.6 percent last month, the highest since May 2024.

But Nigeria’s private sector maintained expansion momentum, with the PMI rising to 52.4 from 51.9—its third consecutive month above the neutral mark.

The improvement was driven by stronger new orders and increased customer demand, although elevated price pressures continued to constrain the pace of growth. Nigeria’s inflation rate rose to 15.38 percent in March from 15.06 percent in February, ending an 11-month disinflation trend.

Egypt weakens, Uganda leads expansion

Egypt recorded the weakest performance among the  major African economies, with its PMI falling to 46.6 from 48.0—the lowest since January 2023. The decline reflects weakening demand, supply chain disruptions and intensifying cost pressures linked to the Middle East crisis.

Cost inflation in the Arab natin climbed to a more than three-year high, triggering a sharp rise in selling prices and signalling further upside risks to inflation, which stood at 15.2 percent in March.

By contrast, Uganda remained the continent’s top performer, with a PMI reading of 55 in April, marking a fourth consecutive month of strong expansion in private sector activity.

Overall, while Africa’s major economies continue to show pockets of resilience, the Iran-linked oil shock is increasingly testing demand, squeezing margins and complicating the region’s fragile recovery path.