Food and beverage sector buoys business sentiment

South Africa’s food and beverage manufacturers are emerging as one of the brightest spots in the country’s manufacturing sector, demonstrating resilience and helping to lift overall business confidence despite rising costs and supply chain disruption. According to the latest Q2 Absa Manufacturing Survey, manufacturing confidence increased by one index point during the second quarter, making it the only major sector tracked by the Bureau for Economic Research (BER) to record an improvement in sentiment. Much of that optimism is driven by the strong performance of the food and beverage sector. Sachin Chanderdhev, sector specialist for manufacturing at Absa Business Banking, said food and beverage manufacturers continued to outperform many other manufacturing subsectors despite facing the same cost and logistics pressures affecting the broader economy. “The biggest positive sentiment is in the food and beverage market,” he said. “It is a resilient sector because consumers still need to eat. They may cut back on other spending, but food remains a necessity.” The sector’s strength is also reflected in capacity utilisation levels, with food and beverage plants remaining among the busiest in the country for several consecutive quarters. Manufacturers have maintained production volumes even as they navigate rising raw material costs, higher electricity tariffs and uncertainty across global supply chains. For South Africa’s cold chain industry, the performance of the food and beverage sector is particularly significant. Strong production activity translates into continued demand for temperature-controlled storage, transport and export services. However, manufacturers are having to work harder to maintain momentum. The survey found that input costs increased sharply during the quarter following a rise in global crude oil prices, which pushed up the cost of raw materials and other production inputs. Manufacturers have responded by renegotiating pricing agreements with customers and reviewing inventory strategies to protect supply continuity. At the same time, logistics constraints continue to add pressure. Although South Africa’s ports have shown signs of improvement, inefficiencies still force manufacturers to carry higher inventory levels and tie up additional working capital. “When logistics and port inefficiencies exist, manufacturers need to hold more stock and order much earlier,” said Chanderdhev. “That places pressure on working capital and cash flow.” For food and beverage producers, where product freshness, shelf life and delivery schedules are critical, efficient logistics networks remain essential. Delays at ports, disruptions to shipping routes and rail constraints can all affect supply chain performance and export competitiveness. Despite these challenges, food and beverage manufacturers have shown a remarkable ability to adapt. Chanderdhev said the sector had developed a strong level of resilience after years of navigating disruptions ranging from Covid-19 and global shipping shocks to energy challenges and geopolitical instability. Manufacturers have become quicker to respond to emerging risks. Looking ahead, Chanderdhev expects food and beverage manufacturing to remain one of the strongest-performing sectors through the remainder of the year. LV