A ‘blip of positivity’ for South Africa

South Africa’s economy has seen a period of strong performance, but there are still major challenges facing the country, such as the upcoming election.

The BankservAfrica Economic Transactions Index (BETI), which measures all interbank economic activity processed by BankservAfrica, jumped in April to its highest level in eight months.  

“Reaching an index level of 134.2 in April, the BETI has almost reached last August’s level and improved by 0.6% on a monthly basis,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. 

Since the end of March, load shedding has been suspended, which has had a positive impact on economic activity.

Spending in anticipation of the upcoming elections could have also played a role, with economic activity for political party campaigns and the IEC’s preparation activities likely to be seen in additional retail spending. 

A breakdown of the BETU around the election data shows that economic activity picked up the month before an election in 6 of the 9 elections under review.

Moreover, the BETI increased in 7 of the 8 cases of the month of the election itself (2024 not included).

“While other developments in the economy are also reflected in the performance of the BETI, election-related spending could make a meaningful impact on the BETI in the period around election dates,” said Elize Kruger, Independent Economist.

Other nowcast indicators also jumped in April, with the S&P Global South Africa Purchasing Managers’ Index (PMI), which measures the operating conditions of the private sector, increasing to 50.3 in April, moving it into positive territory.

The ABSA PMI also jumped to 54 index points due to improved business activity.

Additionally, new vehicle sales in April improved by 2.2% year-on-year—the first time since July 2023 that monthly sales outperformed those of a year earlier.

The standardised nominal value of the transactions cleared through BankservAfrica in April 2024 , however, decreased to R1.290 trillion fro, R1.305 trillion in March, even if the number of transactions jumped to 157.0 million from 156.1 million.

Although April saw a “blip of positivity” there are still several challenges facing the country, such as the uncertainty surrounding the election outcome and what that would mean for the economy.

Investors also have a ‘wait-and-see approach,’ particularly for capital expenditure plans. 

“Assuming the election outcome will not lead to a major disruption in macroeconomic policies, a slight improvement in the economic scenario is still forecast towards the end of the year,” said Kruger. 

Headline inflation is expected to be around 4.5% in December, with the 50 basis points interest rate cuts expected by the year-end.

With load shedding expected to be less intense than in 2023, GDP growth is also expected to increase from 0.6% in 2023 to 1.1% in 2024.

“Although still too low to make a meaningful dent in the unemployment rate, this is somewhat better than the previous year,” said BankservAfrica.

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