The struggle continues for South African consumers

South Africa’s economy is barely moving, even if economists predict that growth in 2024 will be better than in 2023.

The BankservAfrica Economic Transactions Index (BETI), which measures the monthly value of interbank electronic transactions, showed a slight sign of recovery in March following a disappointing February.

“The BETI reached an index level of 133.4, improving by 1.3% compared to a year earlier and 0.8% up from the previous month,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. 

The suspension of load shedding near the end of March, which is continuing, has had a positive impact on economic activity in the last week of the month.

That said, the index was only 0.7% higher than the average measured in the last six months.

Independent economist Elize Kruger said that economic activity has largely moved sideways over the last half-year.

Overall, load shedding, logistics challenges and renewed pressure on fuel prices have added to the ‘more of the same’ narrative for the economy.

The slow growth momentum is having a negative impact on unemployment and the nation’s social-economic challenges.

Uncertainty and volatility in an important election year have made the situation even more challenging.

Consumer inflation also increased from 5.3% in January to 5.6% in February, primarily driven by higher fuel prices, the weak rand exchange rate and an increase in medical aid premiums. Inflation is expected to see an average of 5.3% in 2024.

With the BETI published in real terms, the stickiness of price impacts the BETI deflator.

Kruger said that the BETI deflator stood at 5.1% in December but ticked higher to 5.4% and 5.6% in January and February 2024, respectively.  

Other nowcast indicators also dropped in March, with the S&P Global South Africa Purchasing Managers’ Index (PMI) declining below the neutral level of 50, with businesses seeing the sharpest rate of decline in new order volumes for two years.

The ABSA PMI also dropped as both business activity and new sales orders declined.

Naamsa also said that new vehicle sales dropped by 11.7% compared to a year prior, which was linked to higher interest rates, dampened consumer confidence, the nation’s port challenges, and consistent load shedding.

Looking slightly more positively, the standardised nominal value of transactions cleared through BankservAfrica increased from R1.250 trillion in February to R1.305 trillion in March 2024.

The total number of transactions also grew from 155.5 million to 156.1 million.

Naidoo said that the average value of transactions in March 2024 was 6.0% lower compared to a year prior.

Looking up

Despite the challenging economic environment, a slight improvement is expected in the second half of 2024.

“Expectations of lower international interest rates later in the year could spur a better-performing rand exchange and further moderation in consumer inflation. We could see interest rates fall by 50-75 bps by year-end,” said Kruger. 

Should load shedding be less intense compared to 2023, real GDP growth in 2024 is expected at 1.1%.

Even though this is still low, it is better than the 0.6% seen in 2023, making 2024 a somewhat better year for South Africa.

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