The BankservAfrica Economic Transactions Index (BETI), measuring the value of all electronic interbank transactions processed by BankservAfrica at seasonally adjusted real prices, moderated in June. Still, economic growth for the second quarter is expected to be in positive territory.
“The BETI reached an index level of 135.8, slightly down by 0.5% from the 136.4 recorded in May,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.
However, at this index level, the BETI is 1.6% higher than in March, a strong signal that economic performance surpassed the first quarter’s results and will lead to a positive outcome for the forthcoming quarter.
“Since the end of March, South Africa has been free from load shedding, creating a more productive economic environment,” says independent economist Elize Kruger. “Additional activity relating to the National Elections in May has also stimulated economic activity in recent months.
“But a likely reduction in temporary employment post-election, along with uncertainties around the election outcome and the establishment of a new political dispensation for South Africa, contributed to the slackness in economic activity during June. Added to these are the ongoing stresses of the elevated interest rates and high cost of living impacting South Africans.”
An analysis of the performance of the BETI around election dates in South Africa showed economic activity tends to decline in the month after the election date, partly ascribed to the reversal of temporary employment. The latest BETI data confirmed this for June 2024, therefore the slack observed is not unexpected.
Other nowcast indicators confirmed the slowdown in economic activity, with all reports alluding to uncertainties around the new political dispensation as a contributing factor. The S&P Global South Africa Purchasing Managers’ Index (PMI) dropped below the 50 neutral level again in June, after only two months of growth. The accompanying report cited client hesitancy due to uncertainty around the election outcome.
On a positive note, confidence in the outlook improved to a four-month high.
New vehicle sales, according to Naamsa, indicated new cars and commercial vehicle sales were down by 14% from a year earlier.
After an abrupt U-turn, tumbling to 43.8 index points in May after surging to 54 index points in April, the Absa Purchasing Managers’ Index recovered only marginally to 45.7 in June, remaining in negative growth territory for the second consecutive month. According to the report, insufficient demand weighed heavily on the manufacturing sector’s performance during June.
The standardised nominal value of transactions cleared through BankservAfrica in June 2024 moderated to R1.290 trillion vs R1,301-trillion in May, while the number of transactions moderated to 147,4-million – the lowest since June 2023 – compared to 155,3-million in May.
“While lower in June – but higher than March’s index level of 133.6 – the BETI indeed signals an improved economic outcome for Q2, a welcomed development following the dismal economic performance in the first quarter,” says Kruger.
With the establishment of the new Government of National Unity, South Africa has moved to a ‘new normal’ that could awaken a more positive outcome in the medium term and foster much-needed confidence in the economy, unlike the ‘more of the same’ scenario that has played out over the past years. This will hopefully change investors’ ‘wait-and-see’ views, especially for capital expenditure plans.
“A renewed focus to up South Africa’s economic growth rate is needed to address the multiple challenges playing out in the economy, least of which are ballooning state debt and an unacceptably high unemployment rate,” says Kruger.