Remuneration issues in South Africa’s labour sector, combined with problems with the country’s water and electricity supply, are undermining the economy’s hard-earned resilience. This is according to the latest BankservAfrica Economic Transaction Index (BETI), which was released in Johannesburg yesterday.
“Quite frankly, the BETI indicates that the life is being sucked out of the economy at present,” says Mike Schüssler, chief economist at economists.co.za.
The current strikes in the motor industry have already lead to a production loss of over 50 000 motor vehicles. In addition, the trade balance has declined by an estimated R12-billion as a result of the strikes.
The BETI showed its biggest monthly decline since May 2012, while the quarter-on-quarter growth was at its weakest level since November 2012.
“Hopefully, the slower short-term trend is temporary,” says Schüssler.
However, the effect of strikes always seems to have a delayed reaction on the BETI. One of the reasons is that striking workers lose their wages towards the end of the month, affecting the following month more than the month of the strike. Also, with much of the strike action still taking place, the chances for a recovery are probably slim for both October and probably even November figures.
“While this disappointing outcome may have been expected due to the length of the motor industry strikes as well as the number of strikes across the country, it is nonetheless a bigger-than-expected downturn in the BETI.”
It does now appear that the third quarter of 2013 will show much slower GDP growth than the second quarter. Initial indications were for similar growth rates in the second quarter.
“One downpour does not make a rainy season, but the strength of the downpour does indicate that, along with the continuation of strikes in mining and manufacturing, the growth in the economy is likely to remain subdued for October,” Schüssler says.
The upside is that the percentage change on a year ago is still a relatively healthy 2,6%. This is less than previously expected, but it does provide hope that recovery in the BETI on a short-term basis may bring the economy some quick relief.
Brad Gillis, CE: regulated business at BankservAfrica, explains the BETI offers an overview of current economic trends over a broad range of sectors, making use of economic transactions as captured by BankservAfrica.
“The actual number of electronic transactions that the BETI represents has fallen from 84,2-million in July to only 79,7-million in September,” he says.
According to Schüssler, some of the year-on-year growth should have been better, as both September and October 2012 were declining months due to the Marikana tragedy.
“It is, therefore, telling that the September monthly decline – even after smoothing – is steeper than those following the platinum and transport strikes in September and October last year. Although this is not yet a GDP decline, the risk for further downturns has increased substantially.
“The actual number of transactions do actually fall from time to time and this decline of over 4.5 million transactions is significant, and indicates a loss of momentum in the underlying SA economy,” says Schüssler.
“This comes while much of the world economy is recovering, putting South Africa in a more negative light – at least in relative terms.”
Both car sales and the PMI are in decline in September, further highlighting the broadness of the current downturn in the South African economy. In fact, the PMI had its first negative number since March 2013, while vehicle sales have declined for two months now.
The BETI, however, shows that the September slowdown is much broader than just manufacturing and car sales.