A positive bump for South Africa

South Africa’s economy has received some positive news from the latest BankservAfrica Economic Transaction Index (BETI), but caution is still advised amid troubling global and local factors.

The BETI, which measures the value of all electronic transactions cleared every month, increased in May to 138.3, up 1.5% from April’s level of 136.2.

BankservAfrica said the increase is a welcome improvement following a few months of choppiness, with the index moving sideways over the last eight months. 

Although the development is positive, BankservAfrica said that it is still too early to call an imminent change in trend, as the economic environment has not changed materially in May, and notable risks remain. 

Furthermore, May’s improvement stems from wiping out the weakness evident in the index in April, when the US announcement of punitive import tariffs hit the world. 

Confidence levels tanked globally on this development, amidst the uncertainty it brought to the world economy. 

With the tariffs cooled, South Africa’s tariffs dropped from 30% to 10%, and markets have avoided a worst-case scenario. There has been a rally in confidence, albeit from a low base. 

Compared to a year ago, the BETI has increased by 1.4%, with all components increasing in value terms. 

The best performance came from the heavily weighted EFT credits, Real Time Clearing and PayShap transactions.

The number of transactions that cleared through BankservAfrica in May also reached a record of 176.3 million, surpassing the previous record of 172.4 million reached in March 2025.

The uptick in the BETI in May is a positive given that the nation’s GDP started on the back foot, with growth of 0.1% in Q1 2025 off an already low base. 

The uptick in the BETI in May is welcome, especially given that the economy started 2025 on the back foot, with quarterly growth of only 0.1% in Q1. 

Downward revisions to 2025 growth forecasts have been standard, with the Reuters consensus view dropping from 1.7% in January to 1.2%, triggered by an anticipated downturn in the global economy.

Some positives

That said, some local tailwinds continue to buffer the economy despite the challenging world order. 

Inflation remains below the South African Reserve Bank’s target range of 3% to 6%, giving it ample room to cut interest rates. 

That said, at 7.25%, the repo rate remains relatively high, as real interest rates are considered punitive for an economy muddling along, unable to gain meaningful momentum.

The average real repo rate stands at 3.9%, which is restrictive if the neutral real repo rate of 2.7% is considered.

However, the rand has benefited from weakness in the US dollar after recovering all of its losses after the US “Liberation Day” announcements. 

The low inflation rate will also play an essential role in supporting the recovery of salary earners’ purchasing power. 

As the average salary is expected to be between 5% and 6%, 2025 will be the second straight year of real salary increases, supporting consumer spending. 

Other indicators also increased. The latest data from Naamsa highlight the automotive industry’s strong performance, with a 22.0% y/y improvement in new car sales. 

That said, the seasonally adjusted Absa Purchasing Managers’ Index (PMI), which reflects prospects in the manufacturing sector, was still in contractionary territory for a seventh straight month at 43.1 index points.