By Seun Ibiyemi
Africa’s manufacturing sector remains under significant pressure heading into the second quarter of 2026, as rising energy costs and foreign exchange (FX) volatility continue to constrain growth, according to the latest PAMA Industry Pulse report.
The report, which captures sentiment across the continent, identified energy and power reliability as the most critical challenge, accounting for 29 per cent of constraints facing manufacturers.
This is followed by trade and FX limitations at 21 per cent, and high cost of capital at 17 per cent.
Despite these headwinds, the outlook for the next three months shows cautious optimism. About 46 per cent of respondents expressed optimism, 14 per cent strongly and 32 per cent moderately while 33 per cent remained neutral, reflecting a fragile but improving sentiment across the sector.
The report noted that persistent energy challenges, including high self-generation costs and price volatility, are eroding the competitiveness of African manufacturers.
At the same time, FX instability and trade frictions continue to limit cross-border sourcing and pricing stability, weakening the gains expected from the African Continental Free Trade Area (AfCFTA).
Financing conditions also remain tight, slowing expansion and reducing capacity utilisation, while logistics bottlenecks continue to hinder intra-African trade.
However, there are signs of gradual improvement. The report projects slight easing in energy constraints, marginal improvements in financing conditions, and strengthening demand over the next quarter. Investment appetite is also expected to rise selectively as firms adopt cautious growth strategies.
Industry leaders emphasised that resilience, rather than aggressive expansion, will define success in the near term.
“The next quarter is about resilience. Those who manage costs, energy, and cross-border complexity will maintain competitiveness,” the report stated.
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The report further warned that global developments, including geopolitical tensions and supply chain disruptions, are likely to sustain pressure on energy prices and currency stability across African markets.
It concluded that while regional opportunities exist, particularly in local sourcing and value chain integration, short-term performance will depend largely on cost discipline and operational efficiency rather than strong demand growth.
