Africa’s private sector entered the second half of the year on firmer footing, with business activity rising to its highest level in seven months in July as stronger demand and easing inflation supported growth across several economies.
BusinessDay’s analysis of Purchasing Managers’ Index data from S and P Global across eight African economies shows that the average PMI rose to 51.0 in July, its highest level since January, from 50.5 in June.
Six economies recorded an expansion in private-sector activity, the highest number since March, while two remained in contraction.
The improvement points to a broadening recovery in the continent’s private sector after a weaker June, when three economies recorded contractions. Ghana, Egypt, Zambia, Kenya and Mozambique all recorded improvements in their July PMI readings, while Uganda retained its position as the strongest-performing economy with a PMI of 55.5. Egypt remained the weakest at 46.8.
A PMI reading above 50 signals an expansion in business activity from the previous month, while a reading below 50 indicates contraction. The index is closely watched because it provides an early indication of changes in output, new orders, employment and business confidence.
But the stronger July performance comes with an important caveat: much of the improvement was recorded before renewed tensions in the Middle East began to intensify towards the end of the month.
‘July’s data were collected over a period during which a tailwind from lower oil prices and improved prospects for the situation in the Middle East, including increased shipping flows through the Strait of Hormuz, supported businesses,’ said Chris Williamson, business economist and executive director at S and P Global Market Intelligence.
‘But that tailwind went into reverse toward the end of the month, with oil prices rising sharply again amid renewed hostilities and escalating disruptions to shipping.’
The timing could prove critical for African economies.
Last month’s PMI data capture a period when businesses were benefiting from stronger demand, relatively stable currencies and easing inflation in several markets. The latest escalation in the Middle East, however, raises the risk that some of those gains could be eroded in the months ahead.
Higher oil prices could increase fuel and transportation costs across the continent, while disruptions around the Strait of Hormuz could push up shipping and insurance costs. For economies that rely heavily on imported fuel, food and industrial inputs, those pressures could quickly feed into domestic inflation.
That, in turn, could complicate the task facing African central banks. While improving inflation and stronger business activity could create room for policymakers to support growth, a renewed increase in energy and imported costs could force them to keep monetary policy tighter for longer.
Brent crude has retreated from wartime highs above $120 a barrel to close to $90, but markets remain sensitive to developments around the Strait of Hormuz, through which roughly a fifth of global oil and liquefied natural gas supplies normally pass.
Oil futures had risen by more than $3 a barrel after Iran reviewed legislation that would ban US and Israeli vessels from the Strait of Hormuz, underscoring the sensitivity of energy markets to developments in the region.
For African businesses, the immediate concern is therefore not simply whether activity remains above the 50-point PMI threshold, but whether stronger demand can translate into sustained output and investment without renewed energy, shipping and inflation pressures undermining the recovery.
The data offer an encouraging start to the second half of the year. But whether the improvement becomes a durable recovery will depend increasingly on how long African economies can withstand another external shock.
Demand provides a lift
The strongest common factor across the July surveys was an improvement in demand.
Kenya returned to expansion after several months of weak activity, while Zambia and Mozambique also moved back into growth. Nigeria maintained its expansion, and Uganda continued to record robust growth.
The improvement was also visible in business confidence. In several markets, firms reported stronger expectations for future activity, increased hiring intentions and higher purchasing activity.
But the recovery was not uniform.
Ghana remained in contraction, although the pace of deterioration slowed. Egypt also remained below the 50-point threshold despite a sharp improvement in business confidence, while South Africa recorded only marginal growth.
That divergence matters because it shows that Africa’s recovery is not being driven by a single regional cycle. Instead, individual economies are responding differently to domestic demand, inflation, exchange-rate movements, monetary policy and commodity prices.
Ghana: contraction loses pace
Ghana’s private sector remained under pressure last month, but the downturn weakened considerably.
The West African nation’s PMI increased to 49.2 from 47.7 in June, remaining below the 50-point threshold for a second consecutive month.
New orders declined again as customers struggled to secure funds to pay for purchases, but employment continued to rise and business confidence improved.
‘Ghana’s private sector began the second half of the year in much the same fashion as it ended the first, with firms facing challenges securing new work as customers struggled to secure the necessary funds to commit to new projects,’ said Andrew Harker, economics director at S and P Global Market Intelligence.
He noted that sustained job creation and stronger confidence could support a recovery in business activity as the second half progresses.
The improving inflation picture provides some support for that outlook.
Annual inflation fell to 4.6 percent in July from 5.3 percent in June, its first decline after three consecutive monthly increases, according to the country’s statistical agency. Food inflation slowed to 3.1 percent from 3.9 percent, while non-food inflation eased to 6.1 percent from 6.3 percent.
The Bank of Ghana kept its benchmark rate at 14 percent after pausing in May following five consecutive rate cuts.
However, renewed Middle East tensions could complicate that benign inflation picture if higher oil and shipping costs begin to feed through to domestic prices.
Egypt: confidence returns before activity
Egypt offers another example of improving sentiment ahead of a full recovery in business activity.
Business confidence among Egyptian firms rose to a three-year high in July, even though the non-oil private sector remained in contraction for a seventh consecutive month.
The PMI increased to 46.8 from June’s 46.0, meaning the pace of deterioration slowed but operating conditions remained weak.
S and P Global said early third-quarter PMI data were broadly consistent with annual GDP growth of about 4 percent, following stronger-than-expected expansion in recent quarters.
Africa’s second largest economy grew five percent in the first quarter of 2026, up from 4.8 percent a year earlier, according to the Central Bank of Egypt.
‘The non-oil private sector witnessed a notable uplift in business sentiment in July, despite operating conditions remaining firmly in contraction territory,’ the PMI report said.
The improvement in confidence is encouraging, but inflation remains a constraint. Annual urban inflation accelerated to 14.9 percent in July from 14.3 percent in June.
The Central Bank of Egypt therefore extended its monetary policy pause, leaving its benchmark interest rate at 19 percent for a third consecutive meeting.
The Arab nations’ challenge is to convert improving confidence and stronger economic growth into a sustained recovery in private-sector activity without allowing renewed energy and imported price pressures to derail progress.
Zambia and Kenya return to growth
Zambia’s private sector returned to expansion, ending three consecutive months of contraction.
The PMI rose to 50.7 last month from 49.9, supported by a recovery in output and new orders, stronger employment growth and improved supplier performance.
The expansion was modest, but business confidence reached its highest level in eight-and-a-half years.
‘The country’s private sector returned to growth in July 2026, with the PMI rising to 50.7 from 49.9 in June, driven by a recovery in output and new orders, stronger hiring, improving supplier performance, while also recording the highest level of business confidence since December 2017,’ said Musenge Komeki, head of sales at Stanbic Bank.
It’s inflation remained at 6.5 percent in July, within the Bank of Zambia’s 6-8 percent target range, providing policymakers with some room to support growth.
Kenya also returned to expansion after four months of stagnation or decline.
Its PMI rose from 50.0 in June to 51.3 in July, driven by the strongest increase in new orders since January.
Employment expanded at its fastest pace of the year, while business optimism reached its highest level since February 2023.
But the improvement was constrained by weak output, elevated input costs and supply-chain disruptions.
‘Kenya’s PMI increased in July as conditions in the private sector improved,’ said Christopher Legilisho, economist at Stanbic Bank. ‘The headline gain was mainly driven by stronger new orders and modest short-term hiring, implying that firms are responding to pockets of demand and near-term workload pressures.’
The annual inflation in East Africa’s biggest economy edged up to 6.5 percent in July from 6.4 percent in June.
The Central Bank of Kenya kept its benchmark rate at 8.75 percent on Tuesday, its third consecutive hold, saying the current policy stance remained appropriate for maintaining price and exchange-rate stability.
Mozambique posts strongest improvement in three years
Mozambique recorded one of the most notable improvements in the July survey.
Its PMI rose to 51.4 from 50.0 in June, marking a return to growth after three months of stagnation and the strongest improvement in business conditions in three years.
New business grew at its fastest pace in eight months, while output expanded at the joint-fastest rate in three years.
Business confidence also reached its highest level since October 2022, with 59 percent of firms expecting activity to increase over the next year.
Yet the east African nation illustrates the vulnerability of the recovery to higher energy costs.
The survey recorded the sharpest increase in input prices since May 2022, driven by fuel shortages and supply constraints.
‘The July PMI reflects positive performances across most PMI sub-indices, including output and new orders. However, the employment sub-index slid below 50 for the first time since May 2025, implying still fragile growth,’ said Fáusio Mussá, chief economist for Mozambique at Standard Bank.
Mozambique’s annual inflation had already accelerated to 7.51 percent in June, the highest since May 2023.
The central bank kept its benchmark MIMO rate at 9.25 percent for a third consecutive meeting while tightening liquidity through a higher reserve requirement on local-currency deposits.
Uganda leads the expansion
Uganda remained the strongest-performing economy in the survey, with a PMI of 55.5 in July.
Although the reading eased from 56.5 in June, it marked an 18th consecutive month of improvement in private-sector conditions.
Growth was supported by sustained increases in output and new orders, while employment continued to rise.
But input and purchase prices increased as firms faced higher fuel and staff costs.
‘Ugandan firms reported a further improvement in demand in July, which underpinned robust output,’ said Christopher Legilisho, economist at Stanbic Bank.
The country’s annual inflation rose to 4 percent in July from 3.7 percent in June. Its strong private-sector performance therefore stands out in a region where several economies are still struggling with weak demand and elevated costs.
Nigeria maintains momentum
Nigeria’s private sector continued to expand in July, although growth moderated.
The PMI fell to 52.5 from 53.4 in June but remained above the 50-point threshold for a sixth consecutive month.
New orders continued to increase strongly, supported by new product launches, competitive pricing and improving customer demand.
Output and employment also increased, while input costs rose at their slowest pace in five months.
‘Businesses reported improved customer demand in July while better pricing and new product launches also helped them to capture new orders arising from the increase in demand,’ said Muyiwa Oni, head of equity research for West Africa at Stanbic IBTC Bank.
Annual inflation was little changed at 15.91 percent in June from 15.93 percent in May, helped by relative naira stability.
The Central Bank of Nigeria kept its benchmark rate at 26.5 percent in July after raising it by 50 basis points in February.
South Africa remains fragile
South Africa barely remained in expansion territory in July, highlighting the uneven nature of the regional recovery.
The S and P Global PMI for the continent’s biggest economy stood at 50.3, down slightly from 50.5 in June, as a return to output growth was offset by weaker employment growth and renewed stock drawdowns.
Businesses benefited from easing cost pressures, but weak demand, political instability and supply-chain disruptions continued to weigh on activity.
‘South African businesses enjoyed more breathing room in July, following the cost squeeze over the second quarter, as a drop in fuel prices helped to lower the rate of input price inflation and reduce second-round wage effects,’ said David Owen, principal economist at S and P Global Market Intelligence.
But he warned that the recovery remained fragile, with new orders and business confidence still weak.
The country’s inflation accelerated to five percent in June, its highest level in two years, driven largely by transport and fuel costs.
The South African Reserve Bank kept its benchmark rate at 7 percent last month, balancing inflation risks against a fragile economic recovery.
The recovery faces its biggest test yet
The July PMI data provide a cautiously positive picture of Africa’s private sector.
Demand is recovering in several economies, businesses are becoming more optimistic and employment is strengthening in some markets. The average PMI has moved further into expansion territory, while economies such as Uganda and Mozambique are recording particularly strong improvements.
But the recovery is far from secure.
The biggest immediate risk is that renewed Middle East tensions could reverse some of the favourable conditions businesses enjoyed during the first half of July.
Higher oil prices would raise fuel and transportation costs across the continent. Disruptions to the Strait of Hormuz could increase shipping costs and delay imports, while renewed imported inflation could force central banks to keep interest rates higher for longer.
That would be particularly challenging for economies such as Kenya, Mozambique, Egypt and South Africa, where inflationary pressures are already constraining policy choices.
Last month’s numbers therefore represent an encouraging start to the second half of 2026, but they do not yet signal a decisive turning point.
The more important question for the months ahead is whether stronger demand can translate into sustained increases in output, investment and employment before higher energy costs and geopolitical uncertainty begin to erode the recovery.
For now, Africa’s private sector has momentum. The challenge will be keeping it.