South Africa’s ‘muddle-along’ economy

Amid volatile economic conditions pushing business and household confidence to lower levels, the BankservAfrica Economic Transactions Index (BETI) slipped again in August 2023 – though it is still up compared to August 2022.

“After rebounding in June 2023, the BETI fell in July and again in August to an index level of 134.0, which was lower than the revised 135.6 recorded in the prior month,” said BankservAfrica’s head of stakeholder engagements, Shergeran Naidoo.

“On the upside, the BETI remained in positive territory on an annual basis, improving by 1.9% in August 2023 compared to 1.1% reflected in July.”

The monthly BETI movements reflect the index’s volatility and inability to maintain momentum, akin to the ‘muddle-along’ narrative in the South African economy. 

The July disruption to major transport corridors, the August taxi strike, and the ever-present load-shedding have put considerable pressure on the economy. 

These have been compounded by the depreciating rand exchange rate and rising international oil price that has resulted in fuel price hikes at the beginning of September, signalling renewed upward pressure on consumer inflation in the near term.

“Concurrently, interest rates have stayed at elevated levels with no near-term reprieve expected, leading to clear signs of stress among households,” said independent economist Elize Kruger.

Real household expenditure in Q2 reflects the second negative quarterly growth rate in the past four quarters and points to confidence levels that remain under pressure and, as a result, are keeping expenditure and growth back.

“It has become abundantly clear that the cumulative impact of many challenges that have been playing out in the economy during the past 18 months is now at its harshest, at a time when confidence levels are still under severe pressure,” said Kruger. 

“The steep increase in interest rates, combined with the high cost of living, has resulted in growing strain on consumers in an environment of real and nominal declines in take-home pay.” 

“While the BETI signalled the stronger-than-expected economic growth outcome in Q2, the lower BETI readings in July and August are already signalling a muted performance in Q3.”