The BankservAfrica Economic Transactions Index (BETI), measuring the value of all electronic transactions cleared through BankservAfrica at seasonally adjusted real prices, showed a marginal uptick in August 2024.
Increasing confidence levels, along with expected changes in interest rates and improving consumer inflation levels, could boost economic activity – particularly in the last few months of 2024.
“The BETI reached an index level of 137 in August compared to 136.9 in July and remained at its highest since March 2022,” says Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements. The monthly change was very modest, shifting sideways by 0,1%.
“The BETI is essentially treading water, but consolidating what seems to be a stronger performance in Q3,” says independent economist Elize Kruger.
Although recent economic data outcomes have been somewhat mixed and quite volatile, the underlying positive sentiment evident in the economy is starting to feature in confidence-related survey results.
In the first business sentiment survey released following the formation of the Government of National Unity, the RMB/BER Business Confidence Index (BCI) rose by three index points to reach 38 in Q3 2024.
Although respondents noted constraints, they were generally upbeat about future business conditions. For the first time since early 2022, a slight net majority of respondents across the different sectors expect business conditions to improve in the next quarter.
Similarly, the FNB/BER Building Confidence Index increased further to 40 in Q3 (vs 35 in Q2), reflecting cautious optimism. The residential building sector continued to underperform during Q3 as work for non-residential builders showed a noticeable improvement, while activity at the start of the building pipeline was also encouraging.
“While still early days, improved confidence levels could translate into higher investment spending in the economy driving a much-needed better overall economic performance,” says Kruger.
Following a spike in July, a slight moderation was evident in the number of transactions cleared through BankservAfrica.
“BankservAfrica processed 162,6-million transactions during August compared to 162,9-million in July. The standardised nominal value of transactions increased to R1 308-trillion in August 2024, higher than the R1 283-trillion in July,” says Naidoo.
Over the past six months, fuel prices have decreased significantly due to the Rand’s appreciation and lower international product prices. After four consecutive monthly declines, the petrol price reached its lowest level since February 2023 with cumulative cuts of R3.36/l. Similarly, the diesel price decreased for six consecutive months – cumulatively by about R2.70/l. In addition to these price cuts, the current over-recovery at the pumps suggests a further cut of around R1/l in petrol and diesel prices by early October.
While the reduced fuel costs filter into business and household budgets and reflect as an immediate saving, it also contributed to a notable decline in consumer inflation. Consumer inflation moderated from 5,9% in October 2023 to 4,6% in July 2024.
The latter part of 2024 will see consumer inflation rates dropping further and remaining below 4% for the next six to nine months. Therefore, consumer inflation is forecast to average at 4,5% in 2024 – in line with the midpoint of the South African Reserve Bank’s (SARB) 3% to 6% target band, compared to 6% in 2023.
The improved inflation outlook, amid mediocre economic growth, will provide ample justification for the SARB to lower interest rates by at least 25bps at next week’s Monetary Policy Committee meeting on 19 September – with further cuts anticipated in subsequent meetings.
“Cumulatively, these developments are likely to boost household and business confidence levels further, supporting economic growth in the second half of 2024 and into 2025,” says Kruger. “Lower fuel prices, moderating consumer price inflation, and a first cut in interest rates after an extended upward cycle that started in Q4 2021 and brought interest rates to a 15-year high, could prove to be important tailwinds for the economy in the latter part of 2024.”