NextFin News - Africa’s private-sector data are sending a more complicated signal than the headline in Bloomberg’s latest report suggests. In South Africa and Nigeria, the region’s two most closely watched monthly business surveys point to a rebound in activity or resilient expansion even as fuel-driven inflation pressures start to cool from earlier highs. That combination matters because it hints that the biggest drag on operating conditions in many African economies was never only weak demand — it was also the cost shock created by expensive energy, which has now begun to ease.
In South Africa, the S&P Global PMI fell to 49.6 in May from 51.6 in April, the first reading below 50 in five months, showing a modest deterioration in private-sector conditions. Yet the survey also said the impact of higher fuel costs remained visible in purchase prices and that firms kept hiring at the fastest pace since September 2022. In Nigeria, the Stanbic IBTC Bank PMI showed private-sector activity improving to 54.1 in May from 52.4 in April, its best level in nine months, with new order growth hitting a nine-month high. Taken together, the two surveys suggest African business activity is not moving in lockstep, but the region’s larger economies are proving more resilient than the broad macro gloom around them.
The bigger story is what is happening underneath the PMIs. Higher energy costs have been one of the most persistent reasons for margin pressure, weaker customer demand, and stalled investment across the continent. When those costs rise, they act like a tax on transport, inventory restocking, factory input bills, and household purchasing power. When they fall, the relief shows up quickly in survey data because firms can price more confidently, plan orders more easily, and avoid passing on as much inflation to customers. That is why even a partial easing in fuel prices can change the direction of business sentiment before it shows up in broader economic statistics.
South Africa Shows The Clearest Tug Of War Between Demand And Costs
South Africa’s PMI is a useful example of how quickly energy prices can distort the signal in monthly data. The headline index slipped to 49.6 in May from 51.6 in April, breaking a four-month run of expansion. S&P Global said output fell for the first time in five months and new orders declined for the third time in four months, with firms citing uncertainty caused by the war in the Middle East and rising fuel prices. The survey also said input-cost inflation accelerated to a near four-year high, while business conditions deteriorated only marginally overall.
“The war in the Middle East, and increases in fuel prices in particular, took their toll on the South African private sector in May.”
That is a crucial point: the slowdown was not just about demand weakness. South African companies are still hiring, and the survey said staffing rose at the fastest pace since September 2022. In other words, companies appear to be absorbing higher energy costs through margins and labor expansion rather than retreating sharply on employment. That kind of resilience often shows up when managers believe cost pressures may be temporary, or when they are trying to preserve capacity for a rebound in orders.
It also helps explain why PMIs can look soft even as a recovery is underway. The index is a diffusion measure, not a measure of output in absolute terms. A move below 50 means deterioration relative to the prior month, but it does not mean the economy is in free fall. The South African data instead point to a sector that is still fragile, but where fuel prices were amplifying the downside in May. If those prices ease, the same firms could move back toward expansion without any dramatic shift in underlying demand.
Nigeria Suggests The Demand Side Is Holding Up Better Than Expected
Nigeria’s PMI tells the other side of the story. Stanbic IBTC Bank said the headline index rose to 54.1 in May from 52.4 in April, marking the strongest reading in nine months. The survey highlighted sharper rises in both new orders and output, with new order growth hitting a nine-month high and firms ramping up purchasing and inventories. It also said higher fuel costs were still creating inflationary pressure, but not enough to derail the expansion in activity.
“Private sector activity in Nigeria improved to its best level in nine months, with the headline PMI rising to an impressive 54.1 points in May from 52.4 points in April.”
That matters because Nigeria is one of Africa’s most energy-sensitive large economies. Fuel costs affect transport, logistics, consumer demand, and manufacturing input bills, so a resilient PMI in that environment suggests businesses are coping with the shock better than feared. It does not mean conditions are easy. It means the cost environment may be becoming less punitive, or that firms are finding ways to pass through expenses without destroying demand. For investors and policymakers, that is a meaningful distinction.
It also points to a broader continental theme: Africa’s economies are not moving as a single block. Some markets remain under pressure from currency weakness, power constraints, and weak external demand, while others are benefiting from easing input prices or better domestic demand. The phrase “African economies bounce back” is too neat. The better reading is that selected economies are regaining momentum, and lower energy prices are helping remove one of the biggest obstacles.
Why Energy Costs Matter More Than The Headline Inflation Story
The inflation channel is the mechanism that links these PMIs to the energy market. S&P Global said South African purchase prices rose at a steeper pace in May, and similar reports elsewhere in Africa have repeatedly cited fuel and power as drivers of input-cost inflation. Energy matters because it hits economies at every stage: transport, power generation, warehousing, agriculture, manufacturing, and retail distribution. It is one of the few costs that can worsen both supply and demand at the same time.
That is why lower energy prices can produce an outsized rebound in business surveys. They reduce the pressure to raise selling prices, which supports demand, and they improve visibility for procurement and production planning. In economies where firms already operate with thin margins and limited pricing power, that can be enough to shift sentiment from contraction to expansion even before official GDP data catch up.
The broader policy context also matters. The African Development Bank said in June that Africa’s economies are projected to grow 4.2% in 2026, down from 4.4% in 2025 before rebounding to 4.4% in 2027. That forecast does not imply a uniform upswing, but it does suggest the continent is not entering a broad-based downturn. If energy prices keep easing, the path to that growth profile becomes less dependent on perfect global conditions and more on whether domestic demand can hold.
What Could Still Break The Rebound
The key risk is that the current improvement in sentiment rests on a fragile base. Fuel prices can reverse quickly if supply is interrupted or if geopolitical shocks flare again. Currency weakness can also erase some of the benefit from cheaper oil by making imported fuel more expensive in local terms. In addition, firms may still be dealing with weak consumer purchasing power, high borrowing costs, and electricity shortages that do not disappear just because oil prices move lower.
There is also a timing issue. PMI surveys are timely, but they are not final verdicts on the economy. They capture monthly changes in sentiment and output direction, not the full scale of growth. That means the next few releases will matter a great deal. If South Africa moves back above 50 while Nigeria stays comfortably in expansion territory, the case for a genuine regional recovery strengthens. If fuel prices stabilize but demand slips again, the rebound narrative will need to be rethought.
For now, the most defensible conclusion is narrower and more precise. Energy-price relief is improving the operating environment for parts of Africa’s private sector, and the latest PMIs show that the effect is already visible in two of the continent’s most important markets. The recovery is real, but it is uneven, and it is still being measured more clearly in business surveys than in hard macro data.
The next test is simple: can lower energy costs outlast the latest geopolitical shock, and can that relief keep filtering into orders, output, and hiring? If it can, the PMIs are likely to keep improving before the broader data do. If not, the rebound will turn out to have been a temporary pause in a much tougher cycle.
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