Another hammer blow for consumers in South Africa
September data points to an economy buckling under mounting pressure, as economic activity entered a fourth consecutive month of decline, says BankservAfrica.
The BankservAfrica Economic Transactions Index (BETI) declined further in September 2022 as the local economy buckled under the pressure of severe load shedding and global headwinds.
“The BETI weakened to an index level of 131.1, notably lower than the all-time high of 143.2 in May and the lowest since the 130.6 reached in December 2021,” said Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements. Disturbingly, the BETI has declined for the fourth consecutive month, a contraction of 0.4% was recorded in September compared to 2.0% in August.
On an annual basis, the BETI improved by 1.6% compared to the 1.1% drop in August 2022.
“The ongoing contraction in the BETI, on a monthly basis, reflects the dire conditions in the South African economy during September,” said independent economist Elize Kruger. South Africa endured the worst-ever month of load shedding in September, according to Eskom data indicating 572 of the month’s 720 hours were directly affected.
Analysis by Eskom’s Research, Testing and Development department shows that besides 2021, more power cuts were experienced in September 2022 than in any other year since load shedding started in 2007.
“The negative impact of load shedding reaches all spheres of the economy, businesses and households. Companies buckle under the inability to produce at capacity, the cost of lost production, reduced productivity, the cost of providing alternatives, reduced margins and more. Households have also been hit particularly hard,” says Kruger. In addition, the economy is battling with the rising cost of living and interest rate increases.
The lack of economic momentum, as reflected in the BETI, has surfaced in other nowcasting indicators, which have also plummeted in September. The Absa Purchasing Managers’ Index (PMI) dropped to 48.2, reflecting the impact of severe load shedding on the energy-intensive manufacturing sector.
The S&P Global South Africa PMI, which reflects activity in the broader private sector, contracted for the first time since December 2021 falling to 49.2.
Additionally, global headwinds are gaining momentum with global economic output contracting for a second straight month in September, according to the JP Morgan Composite PMI. Manufacturing is also being hit by rising prices, weakening demand and slumping trade.
In the services sector, consumer-focused firms are suffering from falling demand due to the cost of living crisis and resultant higher interest rates.
The number of transactions cleared through BankservAfrica stalled in September. According to Naidoo, the standardised nominal value of transactions stood at R1.156 trillion, while the number of transactions increased slightly to 136.2 million from 136.1 million in August.
Showing marginal monthly growth of 0.1% in September, the number of transactions was 11.3% higher than a year earlier.
“With the headwinds still rolling unabatedly onto the South African economy, the BETI signals the probability of an economic contraction in Q3 2022. The local economy remains woefully unable to gain synchronised momentum across all sectors in light of all the challenges, and we will continue to experience a ‘muddle-along’ scenario,” said Kruger.
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