Tough times continue for South Africa

The BankservAfrica Economic Transactions Index (BETI) for July is the latest dataset to highlight a troublesome start for Q3 2023.

The BETI shows the standardised value of all economic transactions in South Africa’s economy at seasonally adjusted real prices.

Following a strong showing in June, the BETI slipped slightly in July, adding to the less-than-positive indicators for the first month of the third quarter.

The BETI dropped from 133.9 in June to 133.0 in July.

“Unlike the annual decline of 7.4% experienced in May and 1.8% in June, the BETI fell by only 0.9% in July. Though still negative, the decline was markedly less significant compared to previous months as a result of the low base calculation,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

BankservAfrica added that the BETI is incredibly volatile on a month-on-month basis due to several reasons.

“The strong outcome in June was encouraging; however, we cautioned that the improvement would not necessarily be the start of a sustained synchronised economic recovery. However, the index level for July is still in line with the Q2 average and only slightly below the January level of 133.2,” said Elize Kruger, Independent Economist.

Despite load shedding declining substantially in June, the trend was quickly reversed in July, with stage 6 load shedding hitting following a cold snap.

In addition, tensions in the transport sector caused by several truck torchings interrupted normal practices and hurt business confidence.

Like the BETI, the Absa Purchasing Managers’ Index (PMI) dropped from 47.6 in June to 47.3 in July, signalling a stagnation in the manufacturing sector.

The report noted that manufacturing activity dropped the most since July 2021, when South Africa experienced widespread unrest.

The S&P Global South Africa PMI also reached its lowest level in two years, which suggests that the private sector is still stuck in a downturn.

In addition, domestic vehicle sales, which have been fairly resilient in 2023, were muted in July, as new sales only increased by 1.3% year-on-year.

“Given that the BETI is reflected in real terms, the notable moderation in inflation over the past few months has had an underlying positive impact on the index’s performance,” said Kruger.

Consumer Price Inflation dropped to 5.4% in June, which will provide some relief for cash-stapped South African households and companies.

The standardised nominal value of transactions cleared via BankservAfrica dropped from R1.21 trillion in June to R1.19 trillion in July.

Naidoo said that the number of transactions cleared did, however, reach an all-time high of 149.4 million – up from 145.3 million in June.

The average value of the transactions cleared did drop from BankservAfrica, for electronic and Payshop transactions, dropping 7.9% year-on-year from R8,590 in July 2022 to R7,911 in July.

“The lower July BETI signals a muted started to Q3 with many challenges remaining such as elevated interest rates, policy and political uncertainties, low confidence levels and logistical constraints,” said Kruger.

BankservAfrica said that the pledge from over 100 CEOs of South Africa’s biggest companies to help the government in getting the economy back on track could make a difference in the future.

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