Investors holding their breath with South Africa

 ·13 Jun 2024

South Africa’s economy is showing signs of life, but political instability caused by the Government of National Unity (GNU) could lead to uncertainty.

The BankservAfrica Economic Transactions Index (BETI), which measures the value of all electronic interbank transactions processed by BankservAfrica, rebounded further in May 2024, contributing to a positive view for the economy in the second quarter

“The BETI recovered further to an index level of 136.2 in May, reaching the highest level since June 2023 and improved by 1.4% on a monthly basis,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. 

The third consecutive monthly increase in the BETI could be an early signal that the economy’s performance in Q2 will surpass Q1.

“Since the end of March, South Africans have been load shedding-free, which has created a more productive economic environment, while the additional activity relating to the National Elections in May would have also played a positive role, partly due to additional workers temporarily employed in the run-up to the election day,” said Elize Kruger, Independent Economist.

Historically, economic activity has picked up in six of the nine elections under review, while the BETI increased in eight of the nine (2024 included) election months.

Election-related spending could be seen as having meaningfully impacted the monthly BETI during the period around election dates.

In the months that followed the election, the BETI decreased in four of the eight cases, increased in three and stated the same in one instance.

Thus, if it is realized, some slack in the BETI in June 2024 would not be unexpected.

The strong performance of the BETI signals positive momentum in economic activity over the first two months of Q2, which is a welcome development following a dismal economic performance in Q1, where real GDP growth contracted 0.1% q/q seasonally adjusted.

With the ANC losing its majority, South Africa will now enter uncharted territory in regard to coalition politics.

“The prevailing uncertainty about the outcome of negotiations and what that would mean for the economy’s prospects and economic policy in general, is keeping investors firmly in a ‘wait-and-see’ mode, especially relating to capital expenditure plans,” says Kruger.

There has been some divergence was evident among other nowcast indicators over May.

The Absa Purchasing Managers’ Index (PMI) and new vehicle sales dropped significantly due to uncertainty about the election’s potential outcome.

On the other end of the scale, the S&P Global PMI moved sideways in May. The report indicated a stabilisation in demand conditions in the private sector, while supply chains appeared to be on a better footing in Q2.  

The standardised nominal value of transactions cleared through BankservAfrica in May 2024 increased to R1.301 trillion compared to R1.290 trillion in April, even if the number of transactions moderated to 155.3 million compared to 157 million in April.

Read: Big shake-up for provinces in South Africa is coming

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