South Africa will enter its fifth season of national elections with an economy that seems to lack the resilience to significantly bounce back after the recent strike action, and to create the kind of growth that will address poverty and job creation.
This is according to the latest BankservAfrica Economic Transaction Index (BETI), which has seen the largest decline on a quarterly basis since July 2012 and the slowest annual growth since the first quarter of 2013.
Chief economist for economists.co.za, Mike Schüssler, says that the November BETI has shown an expected recovery after the slump caused by extended strikes during the previous two months. However, at only 0,2% improvement on the month before, it is clear that the economy is still struggling to get traction after a very poor third quarter.
“The good news is that the declining month-on-month BETI in both September and October has been reversed, but, unfortunately so, at a very weak rate.”
Schüssler adds that underlining the weaker growth trend is the fact that the actual number of economic transactions only grew by 1,1% over the last year – to 83,5-million for the month of November. The annual BETI increased by only 0,7% while the quarter to November (including the weak September and October index numbers) declined by 2,9% during the quarter to August.
The good news, however, is that at the end of December the declining September 2013 number falls away from the quarterly index. That should help improve the quarterly numbers, even if December shows merely a slight improvement.
Schüssler describes the BETI’s current performance as a flat movement.
“The BETI has shown improvement, yes. However, after the declines in September and October, the short-term trend is merely changing from a decline to a very flat improvement. At least the declines since August have been arrested, but not enough to stop the annual growth percentage from slowing down.
“The BETI indicates that the economy, while recovering, is currently not showing enough resilience to enhance growth by a large enough measure to see GDP growth significantly above 2% in the fourth quarter of 2013.”
The bounce-back of November 2012 was stronger than the weak recovery of November 2013.
“Nonetheless, there is a recovery underway and one can still expect that recovery to gain some strength in December. It is now clear that growth will remain far below 3% on an annual basis in the fourth quarter – more likely in the range of 2%,” says Schüssler.
“Underlying the overall weak growth trend in the South African economy are many factors, but clearly the country has been stagnating as population growth probably remains higher than economic growth, with the exception of the second quarter of 2013. South Africa still has an underperforming economy.
“Since people receive report cards this time of the year, I would like to give the South African economy an E, which indicates that it passed, but only just. Not only could the economy do better; it is clear that, going forward, improvements in growth are going to be critical in the battle against unemployment as well as income inequality,” Schüssler says.