External environment overview

The following measures provide a broad indication of the external contributing factors that influence our business environment.

Element Context
Gross Domestic Product (GDP) decline

All figures as per the International Monetary Fund (IMF)

According to the IMF, South Africa’s GDP growth is set to increase to 1.1% by the end of 2018. This projection shows a marginally positive improvement, but still places South Africa well below the African continent’s average of 3.7% by the end of 2018. This slow economic growth has significant impact on the country’s primary industries such as manufacturing and mining, adversely affecting our customers and, in turn, possible business prospects for Afrox.

Purchasing Managers’ Index (PMI)

The PMI is a monthly indicator of the economic health of the manufacturing sector and is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A score of 50 is considered neutral and anything below 50 as contracting. The highest ever recorded PMI for the country was 64.2 in July 2006 and the lowest was 34.2 in April 2009.

The PMI for South Africa declined to 44.9 in December 2017 from 48.6 in November 2017. This was the seventh consecutive month that the PMI remained below the 50-point mark.

Business confidence index (BCI)

Business confidence is an indication of the prevailing business conditions in an economy based on scores from participants in various industries. Scores vary between 0 and 100, where 0 indicates an extreme lack of confidence, 50 neutrality and 100 extreme confidence.

BCI in South Africa decreased to 34 in the fourth quarter of 2017 from 35 in the third quarter.

Exchange rates

All figures as at 31 December of year indicated.

The Rand breached the R12 to the Dollar mark in January 2018 for the first time since May 2015.

Refer to the Chairman’s review for further information.