September reflected another month of weakened economic activity indicating bleak prospects for the economy’s growth in the third quarter, according to the latest BankservAfrica Economic Transactions Index (BETI) data.
“The BETI slipped marginally to an index level of 133.6 in September compared to the revised 133.9 in August,” says Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements. “On an annual basis, the BETI increased by 2%.”
On a quarterly basis, the BETI is 2% lower, confirming that the economy lost momentum in Q3. This is substantiated by the data showing that the BETI has declined for the past three consecutive months.
“As a valuable early indicator of economic activity, the BETI data reflects the ongoing ‘muddle-along’ narrative playing out in the South African economy,” explains independent economist, Elize Kruger.
The South African economy continues to face many challenges – ongoing load shedding, water supply issues, and a logistics sector burdened by a steep deterioration in rail services and ongoing port inefficiencies among others.
The rand exchange rate remains under pressure with negative consequences for imported prices, while the fuel price hikes over the past three months signal renewed strain on consumer inflation in the near-term. “As a consequence, interest rates are forecast to remain at current elevated levels for some months to come with no near-term reprieve expected,” says Kruger.
There are already clear signs of stress among households, with South African Reserve Bank data showing household credit continued to reflect the impact of weaker household finances, higher interest rates, fragile consumer confidence, and cautiousness among lenders. Household credit growth eased to 5,8% in August – the lowest since January 2022 – as all the components, except credit card usage, slowed.
Nowcast indicators confirmed the loss of momentum in September. The S&P Global South Africa Purchasing Managers’ Index (PMI) slipped in September to an index level of 49.9. The Absa Purchasing Managers’ Index also subsided considerably in September to an index level of 45.4, down from 49.7 in August, confirming ongoing strain in the manufacturing sector. In the first half of 2023, domestic new vehicle sales were resilient – however, this retreated in September as declining business confidence and reduced disposable income took a toll on buyers.
The standardised nominal value of transactions cleared through BankservAfrica in September 2023 was R1,248-trillion versus R1,207-trillion in August, while the number of transactions subsided somewhat to 152,2-million compared to 152,6-million in the previous month, according to Naidoo. In September, there was an 8,8% drop in the average value of transactions cleared through BankservAfrica, to R7 811 compared to R8 565 in September 2022, also indicative of the change to digital, instant payments in the economy.
The BETI signals a muted economic growth performance in Q3, weaker than Q2, and with a probability of a negative quarterly growth rate.
“A growing number of indicators confirm that the economy remains lacklustre, unable to gain much-needed momentum,” says Kruger. “It is increasingly clear that the cumulative impact of many challenges that have been playing out in the South African economy over the past 18 months is now at its harshest – at a time when confidence levels are still under severe pressure and with no clear end in sight for the ongoing challenges.”