Economic activity in SA is stagnating

Economic activity in South Africa is stagnating as the index for May shows the third decline in the past four months, while it also declined on a monthly basis in nine of past the 12 months. This is bad news for the country’s social and unemployment issues.

The BankservAfrica Economic Transactions Index (BETI) slipped in May 2023, confirming the flat growth trend in the economy. The BETI slipped to an index level of 132.3 in May compared to 132.7 in the previous month.

“On an annual basis, the BETI weakened by a notable 7.4% in May 2023 compared to the revised decline of 3.6% in April,” says Shergeran Naidoo, head of stakeholder engagements at BankservAfrica.

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The monthly decline in the BETI confirms reservations that the April recovery would be a sustainable upward trend, while the annual adjustment was off a high base, he says.

In May 2022, the BETI increased by a solid 3.9% compared to the previous month to reach an all-time high of 142.9 at the time, driven by a strong post-Covid recovery.

“In the past year, the BETI moved sideways with some volatility from month to month. From June 2022 to May 2023, the BETI decline suggested an economic scenario of stagnation,” Elize Kruger, an independent economist, says.

BETI similar to other indicators

In May, the economic environment remained challenging. Recent statistics indicated South Africans spent 27% of the year so far without power, compared to 9.5% in 2022.

Interest rates increased again to reach a 14-year high and the rand exchange rate fell to new lows amid policy and political uncertainties. The cost of living remains elevated and the global economic slowdown is still prevalent.

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The May BETI trends are similar to findings from the other indicators. The Absa Purchasing Managers’ Index (PMI) slipped to 49.2 index points in May and has remained below the neutral 50-level for four consecutive months, signalling stagnation, while the S&P Global South Africa Purchasing Managers’ Index dropped to its lowest level in just under two years of 47.9.

Globally, the rate of expansion in global economic activity accelerated to an 18-month high in May, largely driven by the continued vibrancy of the services sector. Companies reported a further upswing in new order intakes, leading to continued business optimism and solid job creation.

It was, therefore, not surprising that the J.P.Morgan Global Composite PMI Output Index rose to 54.4 in May.

More transactions, but for less money

The standardised nominal value of transactions cleared through BankservAfrica in May 2023 was R1.18 trillion while it was R1.22 trillion in April. The number of transactions increased from 135.9 million in April to 147.2 million in May 2023, partly due to more trading days in May.

The BETI flagged the potential of a negative quarterly growth rate in the first quarter in previous months, with the March BETI 1.9% lower than in the quarter ending December 2022.

However, Kruger says, driven by resilience in the mining, manufacturing and finance sectors, the economy managed to grow marginally in the first quarter, averting a technical recession.

“While eight of the 10 economic sectors recorded positive growth in the first quarter, growth rates could at best be described as subdued, which ties into the observed trend in the BETI.

“The economy remains in a muddle-along scenario and unable to meaningfully alleviate South Africa’s social and unemployment issues,” Kruger says.