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Sub-Saharan Africa begins economic recovery as lockdowns
ease
Four of seven countries register a rise in output over the
third quarter
Job cuts slow from Q2, but only Ghana sees an increase in
employment during Q3
Weak outlook as threat of lasting economic impact hurts
confidence
Sub-Saharan Africa followed the rest of the world out of the
worst of the coronavirus disease 2019 (COVID-19) pandemic in the
third quarter of the year, leading to a robust recovery in business
output and customer demand. However, national data signalled varied
recoveries across the region, particularly as some countries were
slower to emerge from lockdown measures. Furthermore, jobs and
business sentiment were subdued, reflecting reports of permanent
business closures and worries over a long-term hit to the
economy.
PMI survey data cover seven countries across Sub-Saharan Africa:
South Africa, Kenya, Nigeria, Ghana, Uganda, Zambia and Mozambique.
Together they account for approximately 60% of GDP in the region,
providing insights into regional economic trends.
Region sees boost to activity as lockdowns
ease
The Sub-Saharan Africa Output Index (a weighted average of the
seven countries' PMI output indices) rose to an eight-month high of
53.7 in September, and signalled a solid rise in business activity
across the region. The reading marks a considerable turnaround from
23.6 in April at the height of the COVID-19 pandemic. Surveyed
businesses highlighted that the upturn was helped by softer
restrictions on businesses, people and travel.
Growth momentum has been broadly similar to the trend for
emerging markets, with the two series having tracked each other
closely since August. However, Sub-Saharan countries recorded a
much stronger downturn earlier in the year, suggesting that the
region has further ground to make up for. PMI data suggest a rise
in GDP across the region on a quarterly basis, but one that is
highly unlikely to offset the considerable fall expected in the
second quarter.
Kenya leads upturn in output, but three countries still
in decline
While the recovery has been solid at the regional level, there
were variations among the economies, with four of the seven
monitored countries seeing a rise in output during the third
quarter while the remaining three reported a decline. Kenya saw the
strongest growth, linked to the lifting of city travel bans and an
increase in cash flow. Nigeria and Uganda also saw solid rises in
activity as consumer demand improved. Ghana meanwhile registered
the slowest expansion but also suffered the weakest decline in the
second quarter.
Conversely, Zambia, Mozambique and South Africa all recorded
further decreases in activity during the third quarter, though ones
that were far softer than in the previous period. Panellists noted
that a lack of money circulation and currency weakness restricted
consumer spending in Zambia. Meanwhile, downturns in Mozambique and
South Africa can be partly linked to the slower removal of lockdown
restrictions, with the latter nation notably re-implementing some
measures in July.
Employment still widely falling, but at a slower
rate
Rising inflows of new business were seen across the Sub-Saharan
region in the past two months. However, this has had a limited
impact on capacity so far, as reflected by a further sharp
reduction in backlogs. Amid reports of rising costs, firms
subsequently looked to cut expenses by reducing employment. On a
brighter note though, the rate of job shedding eased markedly since
the second quarter, with all seven nations seeing a rise in the
employment index.
Job cuts were largely centred on South Africa and Zambia, where
firms trimmed their workforce numbers in response to reduced output
requirements. Meanwhile, Ghana was the sole country to register a
rise in workforce sizes on average during the third quarter, but
even here the increase was only fractional. The remaining four
nations all saw marginal declines in employment during the third
quarter, though for Nigeria and Uganda, hiring was stepped up from
August onwards.
Concerns of financial impact leave outlook
subdued
The recovery in activity across the region has yet to
significantly bolster business confidence, with sentiment regarding
future growth in Sub-Saharan Africa remaining much weaker than the
historical trend in the third quarter. According to panellists, the
rise in output has done little to abate concerns about the
long-term financial impact of the pandemic. Strikingly, there were
already reports of permanent closures.
While COVID-19 cases have fallen across most of the region,
giving hope of a further easing of restrictions and a stronger
economic recovery, the threat of a resurgence lingers, illustrated
by the growing 'second wave' in Europe that could easily lead to
higher cases in Sub-Saharan Africa as time progresses.
In the event of a second spike, the impacts on activity,
employment and sentiment, as signalled by the PMI data, show there
is a definite risk/reward trade-off from these COVID-19 containment
measures. With this knowledge and experience, government policy is
likely to be more targeted in future waves, as both public health
and economic health will have to be strongly considered.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
