South Africa’s Durban port crisis will likely have a significant negative impact on the country’s economy in the fourth quarter of 2023.
This is according to the S&P Global South Africa PMI, which recorded a steeper downturn in activity across the private sector economy in the final month of the year.
This came as firms signalled a greater impact from the port crisis in Durban on supply chains, inventories, output and demand.
Notably, delivery times lengthened at the sharpest rate in close to two years, contributing to a solid decrease in new order inflows and the sharpest reduction in output since May.
S&P Global Market Intelligence senior economist David Owen said the Durban port crisis “had a destabilising impact on the South African economy in December”.
In November, a maritime gridlock at South African ports kept nearly 100 vessels waiting to dock as Transnet struggled with breakdowns and bad weather.
In December, the S&P Global South Africa PMI slipped back below the 50.0 neutral mark to 49.0 as output levels were forcibly cut by companies facing supply hold-ups.
Owen said firms also reported the quickest decline in new business for almost a year as client spending power remained noticeably weak.
“With the decline in supplier performance worsening, the latest survey data suggests that delivery delays are at a level that has been rarely exceeded during pre-Covid times,” he said.
“This indicates that the port gridlock will further dent the economy at the start of 2024 as businesses face greater shortfalls in input supply.”
He said load-shedding is also expected to remain an issue after electricity outages reportedly hit output and sales in December.
“On the plus side, inflationary pressures have appeared to subside, with purchase price inflation falling to the lowest in three years, and output price pressures concurrently easing from levels recorded earlier in 2023,” he said.
“The slowdown should help to restore a degree of business and consumer confidence as long as the port gridlock does not cause material prices to rise.”
Minerals Council South Africa chief economist Hugo Pienaar said this is the first indication of the hit to South Africa’s economy from the Durban port woes.
“Bottom line: Don’t expect much recovery in Q4 2023 from Q3 real GDP contraction,” he warned.