BankservAfrica says that while South Africa’s economic signals in 2021 are encouraging, the recovery has slowed – and the current load shedding across the country threatens to derail the economy’s progress in the coming months.
The latest BankservAfrica Economic Transactions Index (BETI) showed yet another record breaking month of strong growth in May 2020, up 31.1% on a year-on-year basis.
This was, however, on the back of a very weak May 2020, when the country’s business cycle was at its lowest point as a result of the pandemic and associated lockdown restrictions, the group stressed.
The BETI measures monthly transactions paid into the South African National Payments System, managed by BankservAfrica.
The headline BETI should continue to reflect double-digit growth over the next few months as these will come off the low figures from the first few months of the pandemic in 2020, said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. However, the current load shedding situation could deeply affect this.
The monthly BETI recovery has slowed with the May BETI at 128.8, the same figure as April 2021.
“Although there were no drastic changes in the monthly figures, we saw a 3.4% quarterly increase. According to our records, this was the quickest increase since December 2020,” said Naidoo.
The standardised transaction value in nominal terms was slightly lower than April’s R992.9 billion, he said, while without taking inflation into account, the standardised value of transactions in May 2021 was up 41.1% on a year-on-year basis.
“The number of actual transactions was 108.2 million, reflecting a 17.2% year-on-year improvement. We also observed the average value per transaction increasing by 8.8% in real terms, and back to pre-pandemic values,” said Naidoo. This movement could also be due to current economic developments, he said.
Looking for momentum
With almost all extra spending on the social relief of disaster grants and Temporary Employment Relief Scheme (TERS), as well as the extra allotments to local government, now over, the economy’s momentum will have to come from other sources such as higher commodity prices and low interest rates, said BankservAfrica.
In March 2021, the mining sector capitalised on the commodity boom with sales jumping to total of R75 billion. This benefitted the South African economy as the mining sector’s spend spilled into other services such as transport, recruitment and purchasing supplies to sustain their mining production, it said.
Higher commodity prices and low interest rates are likely to see South Africa’s economy performing stronger in the second quarter of 2021, following Stats SA’s figure yesterday of a 1.1% GDP growth in the first quarter of 2021.
The South African GDP and BETI % change on a quarter-on-quarter basis
“The high level of commodity prices may have driven the return of average transactions to these levels. More economic role players are comfortable with the present conditions as low interest rates continue to raise their confidence levels,” said Mike Schüssler, chief economist at Economists.co.za.
“However, as the third Covid-19 wave unfolds, there may be an economic cycle pull back. But this should be less harsh than in January 2021 and for a shorter term.”
“These movements, together with our BETI figures from the last months indicating a good recovery, leads us to believe economic growth should be somewhat stronger in the second quarter of 2021 and more robust than the first quarter,” said Schüssler. “Load shedding, however can still play a negative role here and lead to muted growth in June 2021.”