Business

South Africa’s economy off to a rocky start in third quarter

Though still on track for second-quarter growth, the latest BankservAfrica data reveals a muted start for the next quarter.

After a stronger performance in June, the monthly BankservAfrica Economic Transactions Index (BETI) slipped somewhat in July, mirroring the less-than-positive economic indicators that emerged during the month.

“The BETI fell to an index level of 133.0 in July compared to the 133.9 recorded in June,” said BankservAfrica’s head of stakeholder engagements, Shergeran Naidoo. 

“Unlike the annual decline of 7.4% experienced in May and 1.8% in June, the BETI fell by only 0.9% in June. Though still negative, the decline was markedly less significant compared to previous months as a result of the low base calculation.”

Due to several factors, the BETI remains volatile on a month-to-month basis.

“The strong outcome in June was encouraging. However, we cautioned that the improvement would not necessarily be the start of a sustained synchronised economic recovery. However, the index level for July is still in line with the Q2 average and only slightly below the January level of 133.2,” explained independent economist Elize Kruger.

The short reprieve from domestic developments, specifically the lower levels of load-shedding in most of June, was rapidly reversed at the beginning of July.

Last month saw the return of stage 6 load-shedding and renewed tension in the transport sector on major corridors interrupting normal practices and negatively impacting business confidence.

Elize Kruger
Elize Kruger

Similar to the BETI, the Absa Purchasing Managers’ Index (PMI) slipped to 47.3 in July, compared to 47.6 points in June, again signalling the stagnation in the manufacturing sector. 

Significantly, the report noted manufacturing activity fell the most since July 2021, when South Africa experienced riots and looting in KwaZulu-Natal and parts of Gauteng. 

The S&P Global South Africa PMI reached its lowest level in two years, suggesting the private sector remains stuck in a downturn. Domestic vehicle sales, which were fairly resilient in 2023, were muted in July, with new sales only up by 1.3% compared to a year earlier.

“Given that the BETI is reflected in real terms, the notable moderation in inflation over the past few months has had an underlying positive impact on the index’s performance,” said Kruger. 

With consumer inflation moderating to 5.4% year-on-year in June, this will provide some relief for many households and companies. 

The standardised nominal value of transactions cleared through BankservAfrica in July 2023 was R1.19 trillion compared to June’s R1.21 trillion. 

According to Naidoo, the number of transactions reached an all-time high of 149.4 million in July, higher than the 145.3 million in June. 

The average value of transactions cleared through BankservAfrica, for electronic and PayShap transactions, dropped by 7.9% to R7911 vs R8590 in July 2022.  

Naidoo said that the value of PayShap relative to the total standardised nominal value of electronic transactions cleared through BankservAfrica has risen over the past few months.

“The lower July BETI signals a muted started to Q3 with many challenges remaining such as elevated interest rates, policy and political uncertainties, low confidence levels and logistical constraints,” said Kruger. 

However, she said the recent pledge by CEOs of South Africa’s top companies to assist the government in getting the economy back on track could make a difference in due course.

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