Signs pointing up for South Africa

Several pieces of data highlight an improved economic environment for South Africa.

The latest Economic Transactions Index (BETI), which measures the value of all electronic transactions cleared via BankervAfrica at seasonally adjusted real prices, saw a steady recovery in October 2024 following a drop in September’s performance.

BankservAfrica, which looks set to be 50% owned by the South African Reserve Bank, said that the latest movement indicates growing momentum in economic activity, which confirms improved conditions since the BETI’s turning point in November 2023.

This latest movement indicates growing momentum in economic activity, confirming improved conditions since the BETI’s turning point in November 2023.

“The BETI increased in October to an index level of 136.5, 0.3% up on the 136.1 recorded in September,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. 

“At this level, the BETI is up by 4.5% compared to a year earlier.”

The BETI data signal that the underlying momentum in the economy is picking up, reflecting improved economic conditions.

“When compared to the turning point in November 2023, the BETI is up by 4.3%, signalling that the economic recovery continues to unfold,” said Elize Kruger, Independent Economist.

Improved confidence levels and more tangible shifts in the economic environment have led to activity gaining momentum relative to prior months.

“Consumers are currently experiencing moderating consumer price inflation, slightly lower interest rates, and real increases in salaries and wages, all of which should contribute to an improvement in purchasing power in Q4,” says Kruger.

“An additional tailwind is the potential that some of the proceeds from the two-pot retirement withdrawals could boost retail spending.”

“At the end of October, the South African Revenue Service indicated that 1.7 million individuals had applied for just short of R30 billion worth of withdrawals. These combined factors are likely to contribute to brisk retail spending during November, including Black Friday.”

Consumer inflation moderated from 5.9% in October 2023 to 3.8% in September 2024, while the forecast for October is 3.0% y/y – the lowest since February 2021.

Headline CPI is expected to stay below 4% for the next 6 to 9 months, which suggests that there will be sustained period of low inflation, albeit if the rand remains stable.

Consumer inflation is thus expected to average 4.5% in 2024 and 2025, which aligns with the mid-point of the SARB’s 3% to 6% target band.

This leaves the Monetary Policy Committee enough room to cut interest rates in its next few meetings.

Given that no unexpected developments arise locally or abroad, the repo rate is expected to reach 7.0% in mid-2025 and reflect a cumulative relief of 125bps.

The election of Donald Trump in the US presidential election is believed to be a medium-term factor and should not impact near-term expectations for interest rate developments in South Africa.

Other economic indicators have also highlighted the unfolding positive economic recovery.

The seasonally adjusted Absa PMI reached 52.6 points in October 2024—the second consecutive reading above 50 and the first since late 2022 and early 2023.

This suggests a near-term upside for the manufacturing sector.

The S&P Global South Africa Purchasing Managers’ Index also remained above 50 for a third month in October, signalling a further strengthening of private sector performance.

The data suggests that the private sector remained in growth mode at the start of Q4, with business activity levels on the rise. Firms attributed this to higher sales and more favourable economic conditions.

Naamsa reported a strong October performance, with new passenger car sales growing 14.5% year over year, the best month since October 2019.

Other data shows that the number of transactions cleared by BankservAfrica spiked to 167.8 million in October, compared to 156.7 million in September, representing a 7.1% year-on-year growth and an all-time high.

The standardised nominal value of transactions increased by 1% moderately to R1,317 trillion in October 2024 from R1,303 trillion in September.

“Overall, these favourable conditions are expected to drive a strong year-end finish, particularly in retail spending, bringing a positive boost for the economy,” said Kruger.

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