African economies show resilience despite rising global tensions

Africa’s private sector activity showed renewed signs of strength in the first quarter of 2026, with more economies recording expansion despite rising global uncertainty triggered by the United States–Israel–Iran conflict, a BusinessDay analysis of the latest Purchasing Managers’ Index (PMI) data from S&P Global shows.

The improvement in PMI readings underscores resilient business momentum across the continent, even as higher energy costs and supply chain disruptions begin to pressure input prices and operating conditions.

Out of eight African economies tracked, six recorded expansion in business activity during the quarter—up from five in the same period last year and three in Q1 2024. Egypt and Ghana were the only countries to remain in contraction territory.

As a high-frequency indicator of economic activity, the PMI often mirrors broader shifts in Gross Domestic Product (GDP). Readings above 50 signal improving business conditions, while those below 50 indicate deterioration. The index is compiled from survey responses by purchasing managers across roughly 400 private sector firms, stratified by sector and company size based on GDP contribution.

Egypt, Ghana lag as cost pressures rise

Egypt recorded the weakest performance among the sampled economies, with an average PMI of 48.9. Rising material costs linked to the Middle East conflict drove a sharp increase in input prices in March, contributing to the steepest cost uptick since late 2024.

“Egyptian companies reported a steeper decline in business activity in March, as demand weakened and prices rose due to the war in the Middle East. Egypt PMI, which tracks conditions in the non-oil economy, fell to its lowest point in almost two years during March,” the index report said.

The report added that new sales declined at a faster pace, while firms turned pessimistic about future activity for the first time on record.

Despite the weak quarterly performance, the Arab nation PMI remains slightly stronger than its 2024 average of 47.6, suggesting a modest underlying improvement.

Ghana posted the second-weakest reading at 49.7, unchanged from a year earlier, even as inflation continues to ease—highlighting a lag between price stability and business recovery.

Uganda leads as demand supports expansion

Uganda emerged as the strongest performer in Q1, with its PMI rising to 53.8 from 51.7, supported by robust demand conditions, increased output, and stronger hiring activity.

“The Stanbic Uganda PMI release for March 2026 showed sustained growth in the private sector at the end of Q1,” said Christopher Legilisho, economist at Stanbic Bank. “Firms reported expansions in output, new orders and employment, implying broad-based growth driven by robust client purchasing power and a supportive macro environment. Backlogs of work increased due to buoyant consumer demand, driving up new orders.”

He noted that firms remain optimistic about output over the next 12 months despite global uncertainty, with increased purchasing activity and inventory accumulation reflecting confidence in demand.

“Firms indicated that higher total input prices and purchase costs were due to greater utility and fuel prices as well as costs for some raw materials, such as timber. Further, there were increases in staff costs and output charges, implying a pass-through to customers.”

According to the latest data from UBOS, Uganda’s headline inflation eased to 2.8 percent year-on-year in March.

South Africa’s weakness highlights uneven recovery

While Q1 data points to improvement, broader trends from 2025 underscore the uneven nature of Africa’s recovery.

South Africa recorded the weakest average PMI on the continent in 2025 at 49.3, down from 50.0 in 2024, with six months of contraction during the year. The economy ended the year on a weaker footing, with December PMI falling to 47.7 from 49.0 in November.

“Business activity decreased sharply in December, with the contraction widespread across sectors and the most pronounced since January,” S&P Global said, citing weak demand and difficult economic conditions.

New orders declined for a third consecutive month, reflecting softer household spending, weaker business demand, and declining export orders.

“After a strong first half, the South African economy experienced softer conditions in the fourth quarter,” said David Owen, senior economist at S&P Global Market Intelligence. “The downturn intensified in December as customers reacted to higher prices and broader economic headwinds.”

Inflation in Africa’s most industrialised economy eased to 3.5 percent in November, prompting the South African Reserve Bank to cut its benchmark repo rate to 6.75 percent.

Uganda sustains leadership in 2025

Uganda also maintained its position as Africa’s strongest PMI performer in 2025, with an average reading of 53.7, up from 53.3 in 2024. It recorded the highest PMI in six months of the year, followed by Nigeria with five.

“Uganda’s private sector performance reflects a resilient domestic economy,” Legilisho said. “Employment conditions remained stable after ten months of growth, while rising orders led to mounting backlogs.”

Firms expanded purchasing activity and inventories to meet rising demand, signalling sustained momentum likely to feed into official growth data.

Despite the improvement in Q1, risks remain elevated.

According to a recent report by the World Bank, high-frequency indicators, such as the PMI, point to a volatile and uneven recovery across Sub-Saharan Africa, shaped by structural constraints and external shocks.

“In the early months of 2025, private sector activity in Ghana and South Africa struggled to gain momentum, with reduced output and weaker export orders reflecting soft global demand and ongoing logistical bottlenecks, while activity in Mozambique was primarily disrupted by civil unrest and protests,” the report said.