Fewer economic transactions in August, but more than a year ago

There were fewer economic transactions in August, but more than a year ago as muted business and consumer confidence levels due to volatile economic conditions weighed down on growth.

After rebounding in June 2023, the BankservAfrica Economic Transactions Index (BETI) fell in July and again in August to an index level of 134.0, which was lower than the revised 135.6 recorded in July.

On the positive side, the BETI remained in positive territory on an annual basis, improving by 1.9% in August 2023 compared to 1.1% reflected in July.

“The monthly BETI movements reflect the index’s volatility and its inability to maintain momentum, similar to the ‘muddle-along’ narrative in the South African economy. The July disruption to major transport corridors, taxi strike in August and ever-present load shedding have put considerable pressure on the economy,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said.

These have been compounded by the depreciating rand exchange rate and rising international oil price that resulted in fuel price hikes at the beginning of September, signalling renewed upward pressure on consumer inflation in the near term.

“Concurrently, interest rates have stayed at elevated levels with no near-term reprieve expected, leading to clear signs of stress among households,” Elize Kruger, an independent economist, pointed out.

Real household expenditure in the second quarter reflects the second negative quarterly growth rate in the past four quarters and points to confidence levels that remain under pressure and as a result, curtails expenditure and growth.

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Dire confidence levels affect economic transactions

The dire confidence levels are confirmed in the latest FNB/BER Consumer Confidence Index report which shows a reading of -16, signalling that consumers are unwilling to spend.

The RMB/BER Business Confidence Index, on the other hand, regained some ground to a level of 33 in the third quarter, although the report noted that business sentiment is still weak and that the large majority of respondents are dissatisfied with the prevailing business conditions.

The S&P Global South Africa Purchasing Managers’ Index™ (PMI®) for August was 51.0, the highest in a year and up from 48.2 in July, showing a modest improvement in the private sector’s operating conditions in August.

The Absa Purchasing Managers’ Index (PMI) also improved somewhat to 49.7 but remained below the neutral 50-level for the seventh consecutive month, signalling a strained manufacturing sector. The domestic new vehicle sales market also faltered in August, with domestic sales down 3.5% compared to a year earlier.

The standardised nominal value of transactions cleared through BankservAfrica in August 2023 was R1.207 trillion compared to July’s R1.210 trillion, while the number of transactions increased to 152.6 million in August, Naidoo says. 

ALSO READ: SA economy grows better than expected in second quarter

Digital payments will decrease economic transactions

“As the economy gradually migrates to digital payments, the average value of transactions measured in the BETI will decline over time, as can be seen by the 5.9% decline to R8 084 in August 2023 compared to R8 591 in August 2022.

The inclusion of the PayShap service’s real-time, low-value transactions in the BETI will over time adjust the average value of transactions lower as more users start to adopt this nascent payment stream.”

PayShap has grown steadily, recording over 1.5 million transactions since its inception in March and as more banks offer this service.

“It has become abundantly clear that the cumulative impact of many challenges that have been playing out in the economy during the past 18 months is now at its harshest, at a time when confidence levels are still under severe pressure.

“The steep increase in interest rates, combined with the high cost of living, has resulted in growing strain on consumers in an environment of real and nominal declines in take-home pay. While the BETI signalled the stronger than expected economic growth outcome in the second quarter, the lower BETI readings in July and August are already signalling a muted performance in the third quarter.”