The South African economy remains on course to a “swoosh” recovery, according to very latest data from the BankservAfrica Economic Transactions Index (BETI), which also indicates stronger growth for South Africa’s upcoming Q3 2020 gross domestic product (GDP) figures.
“The BETI for September 2020 showed a monthly change of 2,7%,” says Shergeran Naidoo, Head of Stakeholder Engagement: BankservAfrica. “Although this was a fourth consecutive month of growth, the rate has slowed down by 1.8% in August 2020 and 6,5% in July 2020 – reflecting the typical nature of a swoosh recovery from the Covid-19 lockdown economy of a quick regain then a gradual slowdown.”
On an annualised basis, the BETI was marginally higher for the first time in six months with an unexpected improvement of 0.4%. “This is the first since March 2020 and a significant shift from -4.3% in August 2020,” says Naidoo.
However, these increases come off the back of the weaker months in September 2019 and October 2019.
“Therefore, the monthly data changes better reflect the state of the economy at present. Four months of declines, of which April’s -13,9% dip was by far the deepest, followed by four months of increases of which July was the strongest followed by successive months of gradually slowing increases in the South African economy – with September being the slowest increase,” says Mike Schüssler, chief economist at economists.co.za. “This reflects the archetypal ‘swoosh’ recovery.”
According to Naidoo, the nominal standardised transaction value was R930,6-billion in September 2020. This was the highest in 2020 but below the values in November 2019 and December 2019. The number of transactions in September was 102,9-million, which was less than July 2020 but higher than most months in 2020.
“The economy’s bounce back could be due to reasons such as the move to lockdown level 1 in September. This was met with relief by businesses and consumers alike. The government’s relief funds, in the form of UIF-TERS benefit payments, special Covid-19 Social Relief Distress (SRD) grant and other institutional pay-outs, amounted to over R100 billion since May 2020 and certainly helped to keep consumer spending and economic activity afloat,” says Schüssler.
Although the lower interest rates will be around for some time, the possible decline in Covid-19 UIF-TERS will have an impact, as well as the possible discontinuation of the SRD grant payment, which is expected to end in October 2020. South Africa’s leading economic indicators will probably show a better reflection of the post-Covid-19 reality in the coming months.
“The debt burden and declines in extra grant payments may see a slower recovery from November onwards,” says Schüssler.
The BETI provides South Africa with a fast indication of underlying economic trends across the economy and is generally in sync with the broader GDP changes in the country. With the latest BETI data, the GDP growth for Q3 2020 is likely to be the fastest on record or at least since 1946. The seasonally adjusted and annualised growth is expected to be around 40% to 50%.
“Although the rate of growth for September’s BETI was slower than that in June 2020, the monthly growth is still moving in an upward direction that many hope the economy will continue going on. This is far from the plummeting declines experienced in the initial months of Covid-19 lockdown,” ends Schüssler.