The lifting of lockdown restrictions in February 2021 gave the South African economy a much-needed boost after the dismal performance in January 2021, according to the latest BankservAfrica Economic Transaction Index (BETI).
“Economic transactions in February increased by 2.2% from January. This is the highest monthly increase since 2014 and 2012,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. “This is a clear indication that the economy has performed better than expected when the restrictions were eased. It is also consistent with the BETI view that when this happens, there is greater certainty, more confidence and a growth in spending.”
The stronger month also showed improvements on an annual and quarterly basis.
“The BETI was 1,4% stronger than February 2020 and increased by 1,7% on a quarterly basis,” says Naidoo.
Over the past year, the BETI tracked the impact of the Covid-19 lockdown and restrictions on South Africa’s economic transactions. It is clear that restrictions affect economic activity; the relaxation brings relief and pent-up demand – for example, people may have spent a lot more when liquor retailers reopened in February and domestic travel may have increased as December’s bans on beaches and rivers, which affected resorts and hotels, were lifted.
“The BETI is at a surprising level one would not have expected six months ago where the previous recoveries were not as swift under the earlier relaxed restrictions,” says Mike Schüssler, chief economist at Economists.co.za. On the whole, South Africa is very likely to show strong positive growth in the first quarter of 2021.
“But, the economy is not out of the woods yet, as seen in yesterday’s Stats SA figures where the real GDP for 2020 decreased by 7%. The Q4 2020 GDP figures increased by 6.3% on an annualised basis. The BETI predicted positive but less record-breaking growth late last year.”
To date, the solid commodity prices, extra government spending on procurement and social grants, along with the R60-billion spend by the UIF-COVID-19 TERS payments, have all helped the economy. Low interest rates over the last year have also contributed to more expenditure while the recovering world supply chain is helping both exports and imports.
However, looking ahead, the BETI growth could slow down as the fiscal policy and government spending slows (as stated in the 2021 Budget Speech). The higher commodity prices could be inflationary and lead to minor interest rate increases in the coming months and continue into 2022. However, all of that is speculative, Schüssler adds.
“So, for the moment, let’s welcome the strong rebound of the February BETI.”
The value of transactions that make up the BETI increased by 6.5% after taking the number of days in the month and weekdays into account.
With cheques falling away from economic transactions, the growth in payments via credit EFTs and Real Time Clearing (RTC) may have increased slightly.
“Both of these payment streams are growing quickly, and far more rapidly than the BETI’s measurement of economic transactional activity,” says Naidoo. This could lead to minor growth in the BETI (with less than 1%) in the coming year or two as electronic transactions tend to be quicker to process than cheques would have been (and are likely taking market share away from cash too).
This trend, however, is expected to be in line with the health of the South African economy.