{"id":781828,"date":"2024-07-10T14:30:00","date_gmt":"2024-07-10T12:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=781828"},"modified":"2024-07-10T14:29:43","modified_gmt":"2024-07-10T12:29:43","slug":"much-needed-relief-for-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/781828\/much-needed-relief-for-south-africa\/","title":{"rendered":"Big turn for South Africa brings relief"},"content":{"rendered":"\n

The BankservAfrica Economic Transactions Index (BETI) moderated in June, but overall GDP growth is due to make a turn for the second quarter of the year, thanks to the extended suspension of load shedding and a boost in activity from the elections.<\/p>\n\n\n\n

The BETI, which measures the value of all electronic interbank transactions processed by BankservAfrica at seasonally adjusted real prices, dropped slightly in June. <\/p>\n\n\n\n

\u201cThe BETI reached an index level of 135.8, slightly down by 0.5% from the 136.4 recorded in May,\u201d says Shergeran Naidoo, BankservAfrica\u2019s Head of Stakeholder Engagements. <\/p>\n\n\n\n

That said, at this index level, the BETI is still 1.6% higher than in March, indicating that economic performance bettered the first quarter\u2019s results and will lead to a positive outcome for Q2 2024<\/strong>.<\/p>\n\n\n\n

\u201cSince the end of March, South Africa has been free from load shedding, creating a more productive economic environment,” said Elize Kruger, Independent Economist. <\/p>\n\n\n\n

“Additional activity relating to the National Elections in May has also stimulated economic activity in recent months.” <\/p>\n\n\n\n

“But a likely reduction in temporary employment post-election, along with uncertainties around the election outcome and the establishment of a new political dispensation for South Africa, contributed to the slackness in economic activity during June,” said Kruger. <\/p>\n\n\n\n

“Added to these are the ongoing stresses of the elevated interest rates and high cost of living impacting South Africans.” <\/p>\n\n\n\n

South Africa’s GDP dropped by 0.1% in Q1 2024, following an expansion of 0.3% in Q4 2023. <\/p>\n\n\n\n

Thus, the BETI indicates that the country should escape a technical recession <\/strong>(two consecutive quarters of retractions). <\/p>\n\n\n

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An analysis of the BETI’s performance around elections shows that economic activity tends to drop in the month after the election due, in part, to a reversal in temporary employment. <\/p>\n\n\n\n

This was no different in June 2024, and the slack observed was not unexpected. <\/p>\n\n\n\n

Other nowcast indicators also confirmed the slowdown in economic activity, and all other indicators mentioned the uncertainty caused by the election result (where the ANC’s vote dropped to 40%) and the formation of the Government of National Unity. <\/p>\n\n\n\n

The S&P Global South Africa Purchasing Managers\u2019 Index (PMI) dropped below the 50 neutral level again in June after only two months of growth. The report noted that clients were hesitant due to the election outcome’s uncertainty. <\/p>\n\n\n\n

Absa’s PMI also remained below the 50 mark for the second straight month, as insufficient demand weighed heavily on the manufacturing sector\u2019s performance during June.<\/p>\n\n\n\n

According to Naamsa, new vehicle sales, including new cars and commercial vehicles, were down 14% from a year earlier.<\/p>\n\n\n\n

\u201cWhile lower in June \u2013 but higher than March\u2019s index level of 133.6 \u2013 the BETI indeed signals an improved
economic outcome for Q2, a welcomed development following the dismal economic performance in the first quarter,\u201d said Kruger.<\/p>\n\n\n\n

“With the establishment of the new Government of National Unity, South Africa has moved to a \u2018new normal\u2019 that could awaken a more positive outcome in the medium term and foster much-needed confidence in the economy, unlike the \u2018more of the same\u2019 scenario that has played out over the past years.” <\/p>\n\n\n\n

“This will hopefully change investors\u2019 \u2018wait-and-see\u2019 views, especially for capital expenditure plans.”<\/p>\n\n\n\n

\u201cA renewed focus to up South Africa\u2019s economic growth rate is needed to address the multiple challenges playing out in the economy, least of which are ballooning state debt and an unacceptably high unemployment rate.” <\/p>\n\n\n\n

Although South Africa as a whole will likely miss a recession, the Eastern Cape has recently recorded a recession after 0.1% and 0.3% retractions in Q4 2023 and Q1 2024, respectively. <\/p>\n\n\n\n

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The one province that has ‘officially entered into a recession’ in South Africa<\/a><\/blockquote>