Economic transactions in South Africa plunged to their lowest levels as Covid-19 took severe effect on the economy and consumers in March.
The BankservAfrica Economic Transaction Index (BETI) is the quickest and broadest monthly indicator of economic activity in the local South African economy. The latest data suggests the economy is shrinking rapidly.
“In March, the BETI declined by 3,3%. On a seasonally adjusted basis, this is the sharpest drop since August 2008,” says Shergeran Naidoo, head of stakeholder engagements at BankservAfrica. “It demonstrates the huge toll of coronavirus on the economy.
“To get a full picture, on a year-on-year basis, the BETI declined by 0,4%. However, on a quarterly basis, this was 3% – the biggest drop since January 2016,” adds Naidoo.
“Monthly transaction movements are not unusual. However, when the drop is as steep as March’s, we have good reason to take note of it as it suggests a potential sharp decline in the South African economy,” says Mike Schüssler, chief economist at economists.co.za. “More concerning is that our other data indicates this is not the end; we could see a much worse decline in April and very possibly in the months thereafter.”
Interestingly, the volume of transactions increased, although the average value per transaction fell by 1,1% in real terms.
“The number of transactions recorded in the BETI was 103,3-million for March,” Naidoo says. “Although it was 3,3% up, the real value declined by 2,7%.”
This could be due to wholesalers, manufacturers and retailers, including pharmacies, making bulk stock purchases. These were in addition to the stockpiling by households. However, the value declined as consumer spending for higher priced items, such as vehicles slowed down.
“The South African government’s nationwide lockdown from late March helped lift consumer spending,” Schüssler adds. “Transactions spiked as South Africans rushed to the shops just before it was implemented. But activity soon quietened down.”
With the BETI down to January 2019 levels, the historic close correlation between the BETI and the country’s GDP performance suggests that South Africa’s GDP annual growth for this year will be lower than originally anticipated pre-Covid 19 breakout in South Africa. The South African Reserve Bank announced yesterday its expectation of a GDP decline of 6,1% in 2020. This compares to the -0,2% expectation just three weeks ago.