Things are pointing up for South Africa – but it will take time

A much-needed boost for South Africa’s economy is on the way, but South Africans will need to be patient.

The BankservAfrica Economic Transactions Index (BETI), which measures the value of all electronic transactions cleared through BankservAfrica at seasonally adjusted real prices, remained largely unchanged in November.

The BETI continued its sideways trend observed since May 2024, following the notable 4.7% increase from October 2023.  

“The BETI moderated slightly in November to an index level of 136.2, 0.4% down from the revised level of 136.8 in October,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. 

The BETI thus remains up by 4.4% compared to last year.

Although the underlying momentum in the economy continues to build, the BETI has been treading water since May 2024 but has remained at an elevated level compared to recent history.

“While a number of structural reforms are in the pipeline, coinciding with a cyclical upswing unfolding, it will take time to reflect in improved economic activity from current levels,” says Elize Kruger, Independent Economist.

The much-anticipated cyclical upswing will be driven by moderating inflation, lower interest rates and real increases in salaries and wages.

Improved confidence levels are also set to add to the upward momentum.

Business confidence levels in the retail sector have reached a three-year high, climbing to 54% according to the Bureau for Economic Research (BER).

The BER said that retailers of non-durable goods, including food, beverages, groceries, cosmetics, and pharmaceuticals reflected the highest growth in sales volumes.

Semi-durable goods retailers specialising in clothing, textiles, and footwear were also the most optimistic group in Q4, with confidence levels soaring to the highest level since Q3 2007. This comes off the back of substantial improvements in sales volumes and profitability.

An additional tailwind is the potential for two-pot retirement withdrawals that will surface in retail spending.

The latest from the South African Revenue Service, showed that over 1.9 million individuals had applied for about R35 billion worth of withdrawals.

“These factors would have contributed to the brisk retail spending during November and Black Friday and will likely carry over into the festive spending season in December,” said Kruger.

Other economic indicators also confirm the unfolding cyclical economic recovery.

The S&P Global South Africa Purchasing Managers’ Index (PMI) was above the 50 ‘no-change’ mark for the fourth straight month in November, signalling a solid improvement in private sector performance.

Even though it recorded slightly below September’s 13-month peak of 51.0, the private sector still grew in Q4, indicated by increased business activities rooted in elevated sales and beneficial economic conditions.

South African firms also their employment levels for the first time in six months.

Naamsa also showed a strong performance in November, with new vehicle sales hitting a 20-month best – increasing by 8.1% year-on-year.

New passenger car sales grew by 20% year-on-year – recording the best month since October 2019.

That said, the Absa Purchasing Managers’ Index slipped to 48.1 in November 2024, suggesting short-term pressure in the manufacturing sector. That said, the PMI has been volatile this year, so this was not unexpected.

Following an all-time high in October, the number of transactions cleared through BankservAfrica in November moderated to 166.3 million, down from 167.8 million in October.

That said, it was still 5% up on November a year ago.

The monthly increase was driven by PayShap* with transaction volumes increasing by 14.7%, following October’s increase of 21.7%.

The standardised nominal value of transactions also jumped to R1,358 trillion in November 2024 compared to R1,317 trillion in October, representing an increase of 3.2%.

“The first three quarters’ economic growth of only 0.4% is indeed disappointing, but optimism for improved growth in 2025 and into the medium term, remains the base case expectation,” said Kruger.

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