Strict lockdown pushes South African PMI to a new record low in April

South African private sector activity fell to a new record low in April, a business survey showed on Wednesday, as company closures due to a nationwide coronavirus lockdown led to a collapse in demand.

Markit’s Purchasing Managers’ Index (PMI) tumbled to 35.1 in April from 44.5 in March, its lowest level since the survey began in 2011. The figure was below the 50 level that separates expansion from contraction for the 12th month in a row.

Africa’s most developed economy is now in its sixth week of a strict lockdown aimed at curbing the spread of COVID-19, the respiratory disease caused by the novel virus, which has infected more than 6,000 South Africans and killed 123.

While the lockdown has been partially eased since Friday, allowing some sectors to operate under specific conditions, the economy, which is already in recession, is still expected to take a massive hit.

The National Treasury said on Monday that gross domestic product could contract by as much as 12% in 2020, with manufacturing, mining and services likely to be the worst affected sectors.

“The plunge in the South Africa PMI was testament to the impact that the nationwide lockdown has had on the economy,” said David Owen, an economist at IHS Markit.

“With the lockdown in place, many firms simply shut down operations, rather than partially reducing output,” Owen added.

“As such, the magnitude of the collapse in economic activity could be even more cataclysmic than the index suggests, with jobs and revenues set to suffer greatly as well.”

Output declined at its sharpest rate on record, while new orders also fell due to export and supply chain restrictions. The survey also found that firms had drastically cut their workforces, raising the risk unemployment will top the 40% mark.

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