The South African economy remains in a volatile state, as indicated in the latest BankservAfrica data, which shows economic transactions underwent its steepest decline in January 2021 after a surprising increase in December.
“In January 2021, the BankservAfrica Economic Transaction Index (BETI) recorded a reading of 121.4,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. “This follows from the stronger month in December 2020 that saw the value of transactions increasing by 1.8%, but declining by 2.3% just one month later.”
The monthly decline in January was the fourth steepest decline in the last five years. Only April, May and June 2020 – the months of the hard lockdown – posted sharper declines.
“As we can see from the numbers, the transactions were under more pressure in January as the stricter lockdown measures and the Covid-19 second wave took a toll on the economy, businesses and consumers,” says Mike Schüssler, chief economist at Economists.co.za. “The good news is that the quarterly data, at 2,7%, is not yet negative. Still, the 1,3% year-on-year headline BETI decline is significant, especially being the biggest decline in the last five months.”
The slowdown in January was also apparent in the volume of transactions, which declined by 2,5% year-on-year while the standardised nominal value showed no change. Meanwhile, the real average value per transaction fell for the 13th consecutive month.
“We believe this indicates that electronic payments are being used by smaller role players as the real value per transaction has been slowing down in the last 10 years,” explains Naidoo.
It seems that, unlike November’s Black Friday and Cyber Monday’s dismal sales, shopping picked up slightly in December due to the pent-up consumer demand. The demand fell in January as the stricter lockdown ban kicked in.
“While we do not know what the outcome will be in the coming months, we believe the months of big declines then large rebounds in the South African economy are now behind us. We expect the economy’s movements to stabilise and that the post-pandemic trends will become clearer in the coming months,” says Schüssler.
Payments after cheques
On 31 December 2020, cheques as a payment instrument came to an end in South Africa. The BETI data, meanwhile, points to a bigger increase in overall electronic credit transfers as well as continuing, strong growth for Real-Time Clearing (RTC) payments.
“This could have to do with cheque payments changing to electronic credit transactions over the past few years. Another factor could be RTC that has grown faster than any other method of electronic payments,” says Naidoo.
In contrast, electronic debits have only shown positive nominal growth of 25% over the last two years. “In the current economic climate, this could be a reflection of consumers and businesses who are reluctant to take on new contract commitments of loans, leases, contracts for mobile phones, satellite television, vehicle tracking and so forth,” says Naidoo.