Economic activity in South Africa at lowest level in a year – BETI

Economic activity in South Africa has declined to its lowest level in a year, due to ever-present rolling blackouts, elevated interest rates, a lacklustre job market and low confidence levels.

The BankservAfrica Economic Transactions Index (BETI) for October fell to its lowest level since November 2022, spelling bad news for the South African economy in the fourth quarter.

The standardised nominal value of transactions cleared through BankservAfrica in October 2023 decreased to R1.216 trillion from September’s R1.248 trillion, while the number of transactions increased to an all-time high of 156.6 million compared to 152.2 million in August 2023.

“Reaching an index level of 131.0, lower than the revised 133.5 reported in September 2023 and only 0.1% higher compared to a year ago, these concerning figures suggest 2023 will not end on a high note for the economy,” says Shergeran Naidoo, head of stakeholder engagement at BankservAfrica.

The BETI already signalled that the economy lost momentum in the third quarter in previous months and October’s reading confirms that the moderation continued into the fourth quarter.

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BETI declined in second half or the year

“Although economic activity surprisingly increased during the first half of the year, a growing number of indicators point to a lacklustre second half,” Elize Kruger, an independent economist, says.

Inflation started to increase again in August, driven by renewed pressure on the rand exchange rate, with negative consequences for the prices of imported goods and notable fuel price hikes. However, the international oil price subsided notably in recent weeks, which should result in a reversal of the bulk of the recent fuel price hikes, she says.

“Still, inflation remains at levels somewhat above the mid-point of the South African Reserve Bank’s 3-6% target band and as such, interest rates are forecast to remain at current elevated levels for some months to come.”

Kruger warns that there are already clear signs of stress among households, with data showing household credit continued to reflect the impact of weaker household finances, higher interest rates, fragile consumer confidence and cautiousness among lenders.

“The unwelcome spike in consumer inflation, from 4.8% in August to 5.4% in September and a forecast of 5.7% for October, does not bode well for the BETI in real terms.”

ALSO READ: Unlikely that slightly improved BETI signals economic recovery

All indicators confirm decreased economic activity

All other indicators based on recently announced data generally confirm the decline in economic activity in October:

• The S&P Global South Africa Purchasing Managers’ Index (PMI) slipped further in October to an index level of 48.9.
• The Absa Purchasing Managers’ Index subsided to 45.4, remaining below the neutral 50-level for the ninth consecutive month, confirming ongoing strain in the manufacturing sector.
• New vehicle sales retreated further as declining business confidence and reduced disposable income impacted buyers. According to Naamsa, 45,460 cars and commercial vehicles were sold in October, 1.1% lower than a year earlier.

A comparison of the average value of transactions cleared through BankservAfrica for the different payment streams included in the BETI for the three months to October 2023 compared to the same period a year ago, reveals interesting trends, Kruger says.

“The ongoing growth in online sales will likely feature again in this year’s Black Friday shopping, with online purchases expected to perform well.”

As the economy gradually migrates towards digital, instant payments, the average value of transactions measured in the BETI is expected to decline over time.