Economic activity in SA struggling to gain momentum

Economic activity in South Africa is struggling to gain momentum, according to data on electronic transactions for February.  

The BankservAfrica Economic Transactions Index (BETI), which measures the value of all electronic transactions cleared through BankservAfrica monthly at seasonally adjusted real prices, slipped further in February, reflecting South Africa’s weaker economic performance.

“The BETI moderated further in February 2025 to 136.4, down 0.6% from January’s 137.2, returning to September levels, but still 3.1% higher year-on-year,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

 He says BankservAfrica’s monthly data shows that the BETI has been in a muddle-along-mode, struggling to gain momentum since May 2024, reflecting South Africa’s weak economic performance in 2024 and early 2025. Economic growth reached just 0.6% in 2024, slightly below 2023’s 0.7% and well below initial expectations.

Independent economist, Elize Kruger, says in addition, South Africa’s population growth exceeds this mediocre growth rate by some margin, resulting in a further slip in the gross domestic product (GDP) per capita measure. “This suggests that all South Africans have become poorer in relative terms during the past year.”

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Business confidence stalling in line with economic activity

While business and household confidence levels recovered notably during 2024, the RMB/BER Business Confidence Index (BCI) stalled in the first quarter of 2025 at 45 index points, indicating that most respondents across different sectors are pessimistic about the current business conditions in South Africa, Kruger says.

“Typical of an economy struggling to gain momentum, where some sectors improve while others decline, February’s leading economic indicators were mixed, providing conflicting signals on the strength of the ongoing cyclical recovery.”

The S&P Global South Africa Purchasing Managers’ Index (PMI) increased from 47.4 in January to 49.0 in February but remained below the 50 ‘no-change threshold’ for the third consecutive month. Sustained contractions were observed in output, new orders, employment and inventories, although in all cases, the rates of decline eased somewhat.

The seasonally adjusted Absa PMI, reflecting on prospects in the manufacturing sector, started the year on the back foot, declining further to 44.7 index points in February from 45.3 points in January 2025, the fourth consecutive contraction and the lowest level since August 2024.

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At least new car sales improved

Kruger says this suggests that the loss of momentum observed in the manufacturing sector at the end of 2024 has been ongoing.

The National Association of Automobile Manufacturers of South Africa, on the other hand, revealed that the strong performance of the vehicle market observed in January continued in February 2025. New vehicle sales were up by 7.3%, a continuation of a strong sales rebound in the fourth quarter of 2024.

New passenger car sales powered ahead with growth of 16.8% in February, indicating an improvement in household budgets driven by lower inflation and interest rates, amongst others.

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Number of transactions or economic activity declined in February

After an all-time high in December 2024 of 170.4 million, the number of transactions cleared through BankservAfrica in January moderated notably to 156.2 million but increased somewhat in February to 158.2 million, 1.7% up on a year ago, Naidoo points out.

Volumes for all categories of payments, except for Real-Time Clearing (-1.6% m/m), increased in February 2025, with the highest increase observed in transactions (6.3% m/m). The standardised nominal value of transactions also increased to R1 332 trillion in February compared to R1 162 trillion in January 2025.

Kruger says the economy’s weak performance in 2024, coupled with rising risks for 2025, is weighing on confidence. “Geopolitical tensions and an escalating global trade war add to concerns, while US-SA trade relations face further strain after US aid was cut to South Africa.

“There are concerns that Africa Growth and Opportunity Act (Agoa) duty-free access to the US markets may not be renewed for South Africa when it expires in September this year.”

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Impact of Trump tariffs on economy and economic activity still unclear

She says while the ultimate outcome and impact on the South African economy are still unclear, it is unlikely to be favourable and, as such, represents a downside risk to the real GDP growth forecast of 1.5% for 2025.

“Furthermore, the 2025 National Budget presented in Parliament yesterday could be considered to be growth-negative in the short term given the announcement of R28 billion in additional taxes to be collected, of which the bulk will likely have a negative impact on consumption expenditure.

“With no relief in bracket creep, employees will effectively face higher income taxes, while two increases of 0.5% in the VAT rate, effective on 1 May 2025 and 1 April 2026, will erode the purchasing power of households.”