South Africa’s economic activity slowed down in April 2022, but it is still showing growth, according to the insights from the latest monthly data in the BankservAfrica Economic Transactions Index (BETI), which measures EFT-originated transactions.
Despite commodity price levels reaching their peak, prices will likely remain elevated for some time to come and support the country’s mining and related sectors.
“The BETI increased by a steady 4.5% compared to a year ago to reach the actual level of 136.1,” said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.
According to Naidoo, the standardised nominal value of transactions processed by BankservAfrica in April 2022, reached R1.147 trillion. The volume of transactions increased to 136 billion.
While corresponding to the easing seen in other nowcasting indices, the BETI is showing growth on a yearly, quarterly, and annual basis, he said.
“Even though the data in the BETI suggests Q2 2022 is off to a steady start, there are several headwinds looming that could potentially derail the economic momentum in the next few months,” said Mike Schüssler, chief economist at Economists.co.za.
The most notable global headwinds the country currently faces include:
- Stringent economic lockdowns in China have placed global supply chains under renewed pressure;
- Fuel prices have rocketed worldwide, not only putting households’ disposable income under pressure but also pushing both consumer and producer prices to sky-high levels;
- The March CPI (Consumer Price Index) in the United States rose to 8.5%, which is at the highest level in 40 years, and exceeded market expectations.
- Monetary policy tightening, which has now become a worldwide phenomenon, will play into softer economic growth rates globally.
“Although the prices of our main export commodities remain elevated and should cushion the economy somewhat, South Africa is in the same boat, with rising inflation rates, mounting interest rates and surging fuel prices,” Schüssler said.
“Furthermore, the economy has been hit by major disruptions in April, most notably the devastating flooding in KwaZulu-Natal (KZN), but also several days of stage four load-shedding,” he said.
A significant negative impact on the local manufacturing sector is concerning, he said.
The Absa Purchasing Managers’ Index (PMI) dropped to a barely positive 50.7 in April, down from 60.0 in March. This is the lowest PMI reading since July 2021, when production was affected by the looting and rioting in KZN and parts of Gauteng, as well as stricter lockdown regulations.
A sharp decline in export sales was also reported in April 2022, most likely due to a combination of flood-induced logistical constraints, the temporary closure of the Durban harbour and the weaker external demand.
Another indicator, confirming the moderating trend in activity, is the non-seasonally adjusted domestic new vehicle sales that came in at 37,107 units in April, falling from 50,607 units sold in March, Schüssler pointed out.
Sales were not only affected by the considerable number of public holidays during the month, but also by the supply chain constraints which were exacerbated by the floods.
However, the automotive industry performed well relative to last year as total local sales increased by 4.3% year-on-year in April – like the BETI – while sales were up by 0.9% compared to the pre-pandemic figures in April 2019.
“Therefore, the fact that the BETI held up so well in April symbolises the resilience of the South African consumers and businesses,” said Schüssler.